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Writer's pictureRyan Weller

Why a MAP Policy is Necessary and the Risks it may Create.

I've been in the consumer goods industry since my junior year in college. From my start as a sales associate with Universal Athletic in Montana, and the Runner's Roost in Denver, to a trifecta of footwear brand service with Reebok/Nike/adidas, a MAP policy has always been an important component of the product lines I've sold, created, or supported.


The fundamental benefit of a Minimum Advertised Price policy ensures that products are not perceived as low-quality, but rather boast an air of desirability. This benefit holds true for brands and retailers. If these values are maintained, these products fuel sustainable business for sales channels by driving demand for sought after products at higher margins through their (physical and digital) doors.


These products and what they mean to consumer experience are the lifeblood that fuels brand health. By maintaining consistent advertised pricing, brands can protect their image and ensure that their products are seen as premium and worth the investment. Retailers use these to manage profitability and shape their position with consumers. This not only helps in building a loyal customer base, but it also helps in attracting new customers who are looking for quality and reliability.


Moreover, minimum advertised price policies foster a healthy competitive environment where the focus is on good merchandising (from the retailer's perspective) and the value and benefits of the product (from the manufacturer's perspective), rather than just the price. In the long run, this strategy supports the overall ecosystem, benefiting manufacturers, retailers, and consumers alike.


But...if it was that easy, this would be the shortest ever blog posts on the world wide web.


Terms & Conditions are the key to marketplace health.
Building the right policies to achieve marketplace goals is crucial to brand longevity.


How MAP policies have changed over time


MAP policies haven't changed per se, but how they guide profitability, and how they guide market perception of a given brand has changed quite a bit. True, MAP policies did exist before ecommerce, and the definition of what brands consider an "advertised price" are largely the same. Early on, violations would be reported via phone or fax (usually from a competitor of the violating outlet), and then enforced with varying degrees of urgency.


Trust me, I had the same reaction to what you're probably thinking right now. "Before ecommerce" to a time when fax machines existed sounds like a scene out of Bonanza or Little House on the Prairie. But, it really wasn't all that long ago.


Back in these olden days, prior to the rise of ecommerce, the impact of MAP violations had less impact on the overall market. The result was mostly a hit to the violating retailers' margin and their relationship with their manufacturing partners. But, there was limited local impact to a brands image. Enough of these violations could combine to have a negative effect on brand health, but if that happened it was a likely indicator that the product didn't justify the price. In those cases, the market would adjust and move through the discounted product more quietly.


What is clear is now, however, is that the retail landscape has drastically changed from the days of the fax machine. The growth of ecommerce and the overwhelming number of marketplace sales outlets have escalated the need for brands to invest in marketplace monitoring. At the same time, technological advances have made it easier for brands to have visibility to the advertised prices of their products.


What to expect from your MAP Policy


The good news is the retail world is familiar with MAP policies and the benefit they can deliver to retail businesses. Despite this ubiquitous familiarity brands should constantly be asking two questions in the context of MAP policies and channel health.

  1. Has the market significantly changed since we last updated our policies?

  2. Do our policies set clear direction and expectations that protect our brand and our business?


If we answer "no" to either one of these questions, then we have some work to do.


Specific to the MAP policy itself, Jared Bona penned an article for his law firm titled, "Does a Minimum Advertised Price (MAP) Policy Violate the Antitrust Laws?" In answering the question he poses in the title; Mr. Bona also covers a lot of useful information about the legality of MAP policies and how to implement them. He advises, "...if you do add a MAP policy to your agreement with a distributor, you should make it absolutely clear that the distributor and anyone else down the chain can sell at whatever price they’d like."


Why MAP Policies are not Enough Today


The bad news is in today's world, MAP can likely only be enforced on certain listings. Moreover, as a brand owner, the perfect MAP policy, that is perfectly executed, still won’t solve or prevent your channel problems. For example, a retailer/seller would need authorization to sell on a particular website or marketplace before listing any product offers for sale. This has to come “before” the MAP policy, so to speak. That requirement, and other important details – that are contractual terms and NOT policy terms - are best set in our Terms & Conditions of Sale.


ECommerce legal expert Michael Murphy of K&L Gates published an article called, ""It's Authorization, Stupid": An Authorized Reseller Program, Not a MAP, Is Your Best Weapon to Fight Unauthorized Internet Resellers," that covers this very topic. In the article Murphy makes several imperative points when it comes to marketplace management.


  1. "Courts have long held that price fixing is illegal.[1] At the same time, courts have consistently found that manufacturers are permitted to maintain pricing programs with or affecting resellers in two circumstances: Minimum Advertised Price (“MAP”) Policies and Unilateral Advertising and/or Resale Pricing (“UP”) Policies." The difference between MAP policies and UP polices have become somewhat blurred in practical application over the years, but the key takeaway is there are options to achieve your desired marketplace goal if your policies are structured properly.

  2. "Price maintenance policies alone have a limited ability to curtail price erosion in the marketplace. Without knowing the identity of its resellers, a manufacturer may be able to publish the “carrots” of its pricing policy, but will not know on whom or how to enforce the “sticks.” The simple announcement of a pricing policy, without more, will achieve minimal market control."


If I could have made point number 2 more bold, I would have.


In an interview with Murphy for this post, he continues, "the key to obtaining profitable e-commerce growth is getting more transparency and control over your product distribution through a strong authorization program paired with a strategy for monitoring and a willingness for enforcement. A pricing policy is a great piece of the puzzle to close the pricing delta, but will only work if distribution leaks are being identified and shut off."


The Power of Terms & Conditions


Sales terms and conditions, or distribution agreements, -- or whatever the document is titled where these sales terms and conditions live within a given organization’s documents – “are the unsung heroes within the discipline of managing our distribution channels” comments Sam Gasowski, a former colleague and long-time general counsel for consumer product manufacturers and brand owners.


“Lots of attention is given to MAP. And rightly so. MAP often is the more interesting thing to talk about. It also deserves attention because it can be an area of significant legal risk if not put together and executed on appropriately”, continues Gasowski.


To his point, our sales terms and conditions simply do not get enough time and attention. Here are few important points that Sam and I recently discussed:


• Nothing is Carved in Stone. These terms and conditions should be viewed as a living and breathing document, which sales organizations have a regular cadence of reviewing and updating. Market conditions are constantly in flux -- they are anything but static. Your sales terms and conditions should be just as dynamic.


• Be Intentional. Our sales terms and conditions must be clearly communicated to our accounts. Our accounts must receive them, review them and understand them. They should be in “plain English.”

• In Business, No One Likes Surprises. Make sure that your sales terms and conditions are socialized often and frequently. Confirm receipt and understanding. Consider how you can go about getting an acknowledgement of both receipt and understanding. After all, the terms and conditions should be an operating manual for our accounts. We can't be surprised (much less flabbergasted) when our accounts don’t follow them if they didn't know where those terms and conditions lived, or what they meant. It's much better to make sure that these terms and conditions are well socialized as a proactive measure. Having the “gotcha” scenario when the account violates them is a situation in which no one wins. Rather, conversations around “violation” should be the exception, not the expectation. Otherwise, at best, you’re not being a good partner. And at worst, you’re failing your accounts.


We specialize in the analysis, data mining, and source of product identification of online listings. This information clearly and consistently informs our clients which sales policies to enforce at the source of product. We are passionate about protecting brand health and seeing strong brands thrive in today's marketplace.


Conclusion


With this information, consult with an attorney to put your policies together and to also collect best practices on their collective enforcement. Once you have your MAP or UP in place, clearly defined and communicated, ENFORCE IT. Once you have your Authorized Reseller or Distribution Policy in place, clearly defined and communicated, ENFORCE IT! These policies exist to protect the longevity of the brands health. Remember, key retailers look for products from strong brands that drive sales now and into the future. These retailers are counting on the brand to ENFORCE THE POLICIES that are intended to protect their business.


How do you wade through the complexity and enforcement of all the online listings? Click the red "Let's Connect," button above. It's free.


MAP policies will always have their place. But don’t expect them to be a channel panacea. Give due attention to your sales terms and conditions. This is one of the best ways to support our brands, our accounts and our end consumers. The goal with any policy is to make sure it is relevant and drives the desired business, beyond that, enable accounts to adhere to them. If they are enforced the authorized sales channel wins.


Counter Diversion is a boutique SaaS company - we don't have marketing, and we don't use high-pressure sales tactics. Our goal is to have solid, honest conversations about the issues at hand and then either recommend our service or another one that is a better fit for your needs. If you'd like to engage in that type of discussion, schedule a consultation here.


[1] See, e.g., United States v. Masonite Corp., 316 U.S. 265, 282 (1942). See also 15 U.S.C. § 1 (“Every contract, combination . . . , or conspiracy, in restraint of trade or commerce . . . is declared illegal.”).






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