20 Things to Consider When Preparing a Minimum Advertised Price (MAP) Policy - Part 1
MAP Policy Part One: Let’s Start at the Very Beginning; a Very Good Place to Start.
At Vorys eControl, we have helped hundreds of companies design, draft, and implement a minimum advertised price (MAP) policy that complements their broader eControl program. Inevitably, common themes, issues, and challenges surface as companies independently consider various decision points. During this four part blog series, we will be going through twenty things to consider when deciding whether to launch (or perhaps update) your MAP policy – just in time for the upcoming shopping season.
This week we cover MAP policy 101; it’s back to basics.
- What Actually Is a Minimum Advertised Price? The minimum advertised price is the lowest price at which your product can be advertised and be in compliance with your MAP policy. A company that complies with your MAP policy is still free to set the final resale price. Resale price is the price at which a product is actually sold by a reseller to an end user.
Depending on the situation, the minimum advertised price may equal the final resale price, but the final resale price may also be lower than the minimum advertised price without it being a violation of the company’s MAP policy. It is important that if you have a MAP policy, it does not conflate minimum advertised price with resale price. It is also important that a company is not expressly or inadvertently creating a minimum resale price agreement (through a MAP policy or otherwise) because it is illegal in certain states, notably California.
- Timing Is Everything. If your company is suffering from rampant unauthorized sellers, then consider delaying the implementation of your MAP policy until you have the necessary control mechanisms in place to effectively address them. Otherwise, a MAP policy may actually penalize your authorized resellers because they will be attempting to comply with the MAP policy while the unauthorized sellers, who do not care about your MAP policy, will disregard it and likely win the sale. Generally, a period of cleanup against unauthorized sellers is recommended prior to the launch and implementation of a MAP policy.
- Where in the Distribution Chain Does the MAP Policy Apply? There is sometimes confusion about which channel partner’s advertised pricing is subject to a MAP policy. Generally, a MAP policy is applicable to the advertised prices seen by end user consumers, so downstream resellers who are displaying advertised prices to an end user consumer will be subject to a MAP policy. Traditionally, a MAP policy would not apply to the advertised prices from a distributor or wholesaler selling products to a reseller (in other words, a B2B sale). For the visual learners, the reseller bolded is where traditional MAP policies apply in the downstream distribution chain.
Company → Reseller → End user
Company → Distributor → Reseller → End user
For brands using two-step distribution, the distributor may need to pass down the MAP policy to its reseller customers if the company does not have direct lines of communication to those customers.
- Do Not “Find and Replace.” All too often, we see companies attempting to implement a MAP policy that was found online with the company name changed, only to find that the MAP policy is not workable for their own business and it does not drive the desired results. There are many business decisions to carefully consider in structuring your company’s MAP policy, so it is important to work through those decisions methodically with a full understanding of the pros and cons of each provision and the anticipated impact on your resellers. An experienced attorney can help with these decision points and ensure competition (antitrust) compliance.
- I Want to Have My Cake and Eat It Too. You totally can – with both an eControl program foundation and a well-thought-out MAP policy. Critically, a MAP policy only works if the company has control over both authorized and unauthorized sellers. A company has no recourse under a MAP policy against an unauthorized seller who is violating MAP – that unauthorized seller will break MAP all day long and twice on Sunday to win the sale. If your organization is suffering from unknown or unauthorized resellers, then a broader eControl program is a crucial component to setting the stage for successful MAP compliance.
Want to chat MAP? Please reach out to attorney Jessica Cunning at email@example.com or attorney Kate Early at firstname.lastname@example.org for a complimentary 30 minute virtual session. Jessica and Kate are both strategy leaders in the firm’s nationally recognized Vorys eControl practice, helping companies draft, implement, and execute workable MAP policies.
Want to learn more? Consider reading Vorys eControl’s white paper “The Winning Strategy for MAP Success and Long-Term Brand Value in the eCommerce Market” accessible here.