Stopping Product Diversion is becoming increasingly important for brands due to the continued growth of e-commerce and online marketplaces. It is key to ultimately being able to successfully enforcing a MAP policy.
Minimum advertised price policies, or MAP policies, are intended to limit the price at which products can be advertised. In other words, they set the lowest price at which an authorized seller is allowed to advertise a company’s products—including for internet sales—regardless of the price at which the products might actually be sold.
In other words, MAP policies are not agreements and they do not actually restrict sales prices. Minimum advertised price policies are intended to prevent sellers from advertising below a certain price.
If a manufacturer of salon products sets the minimum advertised price at $100, an authorized seller of those products is not supposed to sell below $100. Technically, though, he or she can still actually sell the products for less.
MAP policies are generally effective for keeping authorized sellers from advertising discounts. According to a recent study from Northwestern’s Kellogg School of Management, just 15 percent of authorized sellers violate these policies, in contrast to 53 percent of unauthorized sellers.
Sales in violation of a company’s MAP policy can cause a number of problems. For example:
- harming the company’s earning potential;
- interfering with its ability to attract and keep its legitimate sellers happy; and
- tarnishing its trademarks and goodwill/reputation.
It is, therefore, important that companies with MAP policies actually enforce them. This requires both that the companies monitor authorized sellers to ensure compliance and take action to stop unauthorized sellers who divert their products. Companies must have procedures in place for MAP policy enforcement as to authorized sellers.