Minimum Advertised Price (MAP) Policies for Manufacturers and Retailers
Minimum Advertised Price (MAP) Policies for Manufacturers and Retailers
If you’re a manufacturer whose products are sold through online retailers as well as brick-and-mortar stores, you may have been advised that you need to enforce a MAP (minimum advertised price) policy with your retailers. If you’re a retailer, particularly one with an online shop, you need to be aware of how your marketing incentives may influence your ongoing relationships with your suppliers. We are going to look at some of the issues around MAP so that you can make informed decisions about your business relationships.
MAP, which stands for Minimum Advertised Price, is the price at which manufacturers inform retailers that they can advertise the manufacturer’s products and still remain an authorized retailer in good standing. A MAP policy is most often used with online retailers to prevent the retail phenomenon of “showrooming,” when consumers go to a physical store to see, feel and learn about a product, then go home to buy it online from the retailer selling at the lowest price they can find. The growth of MAP policies followed a 2007 Supreme Court decision in which the decision found that minimum resale price maintenance (RPM) did not per se violate Section I of the Sherman (Antitrust) Act. Basically, as long as a retailer is free to sell a product at a price they determine, the manufacturer is free to require retailers not to advertise a price below the manufacturer’s determined minimum.
How does this work in practice? You have probably been seeing without knowing that you are seeing the result of this decision. For example, other lower-court decisions found that the shopping cart of an online store was the virtual equivalent of a physical store, so the retailer could reveal their minimum price once an item was in the consumer’s shopping cart. Those sites where you have to “Add Item to Cart to See Price”? That’s how that retailer is meeting the manufacturer’s MAP policy while competing for the sale on price.
MAP for Retailers
If you are an authorized seller of a manufacturer’s products, you may find that you must abide by that manufacturer’s MAP policy or risk losing your status as a stockist. Again, you are free to sell the products at any price you want, but you cannot advertise a price below the one set by their MAP policy. There are ways around this, like the “Add to Cart” solution we mentioned above. You can also offer coupons that are not tied to a single specific product, but are broadly applicable to much of the merchandise you carry, or a “buy Product Q, get any other product in the store at 50% off” type of strategy.
Often a manufacturer will offer marketing incentives as part of their MAP policy. In exchange for following their MAP policy, they will help you cover the cost of advertising their products (and their availability) at your store.
How do you decide if a particular manufacturer’s MAP policy is going to work for you? Here are some things to consider:
- Is this manufacturer’s product widely available at big-box and online retailers as well as at specialty retail stores? If you’re competing with retail outlets who routinely offer coupons and/or other discounts that make this specific product’s de facto minimum retail price lower than one you can routinely afford to match, you might want to look for another supplier or product to fill that niche in your inventory. Consumers will showroom the product in your store, then buy it elsewhere – and you will end up selling it in the half-price bin, at best breaking even, if not losing money.
- Does this manufacturer enforce their MAP policy with other retailers comparable to your own store? If you can do a little research and find that Store X always has the product at a lower price than the MAP, you either need to negotiate the terms of the policy, pointing out that the playing field is not level, or again, find another supplier.
- Does the manufacturer offer marketing materials or other incentives, including the rest of their product line, that makes it worth it to you to accept their MAP policy? Price is not the only basis on which specialty retailers compete, and both the breadth of product lines and the integrity of your business relationship have value that has to be considered as well.
MAP for Manufacturers
As a manufacturer, you are going to determine what your MAP policy will be. We want to say up front that you should consult an attorney to make sure that your MAP policy does not violate the Sherman Act, but here are some basic guidelines that you can consider as you go about implementing a MAP policy for your retailers:
- A MAP policy is not an agreement, but information shared with a retailer that lets them know that you will take action in your business relationship if they advertise your products at a price below your MAP. Neither side signs a MAP.
- Make sure that your MAP is limited to advertising only. Your authorized retailers can sell your products at any price they wish. They just can’t advertise a price below your MAP.
- Your MAP should be enforced broadly–across all media and retailer locations, not just against online retailers.
Offering marketing materials and other advertising support to your retailers gives you more leverage to enforce your MAP policy with them. If they are paying for all of their own advertising, they don’t have any particular reason to adhere to your policy. But if your company is helping with those costs, most retailers are going to recognize that you have an interest in the price at which they advertise your product.
A MAP policy is useless if you are not prepared to enforce it. You should have a clear plan of action in response to violations of your MAP policy which is either spelled out in the policy itself or a FAQ contained within it. Here are some of the questions you will need to answer when creating your policy (again, you should draft your MAP with legal counsel, but this can help you get the ball rolling):
- How will you monitor your retailers’ advertised prices?
- Is there a particular retailer in whose store your product placement is essential? If so, will you allow that retailer’s desires to influence your MAP policy?
- In the event of a violation, how much negotiation are you willing to do, and will you do it with ALL of your authorized retailers? You should be if you don’t want to run afoul of the law.
- Are you prepared to drop a retailer if they violate your MAP?
All of these questions merely address situations in which there is an issue with your authorized retailers – but unauthorized retailers are a whole other story. Cracking down on unauthorized retailers of your product helps protect your brand reputation and the valuable relationships you maintain with your authorized retailers. Consumers who buy your products from authorized retailers should get something beyond the product–whether it’s a warranty, access to exclusive customer service or some sort of promotion available only through an authorized outlet. These “extras” can constitute a material difference from what unauthorized retailers are offering, establishing grounds on which you can go after them for trademark violation.
Whether you’re a manufacturer or a retailer, there are a lot of issues to consider around MAP policies. Do your research and supplement it with appropriate professional advice. You really don’t want to go to court over a MAP.
We can help you craft a marketing strategy for your company that keeps a lot more than MAP in mind. For more information, contact email@example.com.