It’s unfortunate, but we at TrackStreet still see manufacturers and brands making these MAP pricing policy mistakes all the time. Let’s make sure you know to avoid them when drafting and enforcing your MAP policy.
1. Trying to Outsource MAP Pricing Enforcement to Distributors or Wholesalers
If your distribution channel includes wholesalers or other intermediaries between your factory and your retail partners, those wholesalers and distributors should share in the responsibility for making sure that only your legitimate retail partners are able to acquire your inventory. You can and should enlist their help in restricting reseller access to your products through a two-part strategy. First, create an Authorized Dealer Program that limits which retail companies may purchase your inventory. Then, update your wholesaler and distributor agreements to reflect your new requirement that these companies sell only to the retailers on your “authorized dealer” list.
But your distribution partners are not responsible for policing how the retailers who buy your inventory from them advertise or resell those products to end-user customers. Monitoring and enforcing your MAP policy is your company’s responsibility.
Sometimes manufacturers expect distributors to take the lead in enforcing their MAP policies, or even expect these distributors to develop their own MAP policies applicable to dealers. In either case, there is legal risk to this approach: It could be viewed as creating an agreement on resale price, which could elevate the manufacturer’s risk of antitrust legal trouble.
But, perhaps even more important from a business perspective, shouldn’t manufacturers control their own policies?
What to do instead
As a manufacturer, you must assume exclusive responsibility for monitoring and enforcing your MAP pricing policy. But you can enlist support from your distributors by asking them to (a) pass your communications on to your retail partners, (b) sell only to those retail partners, (c) not sell to anyone on your Do-Not-Sell List, and (d) provide their sales data back to your company (such as which retailers have purchased which serialized units of your inventory).
2. Stopping Short of Enforcing “In the Cart” Pricing for Resellers Online
Many manufacturers share a misperception that a MAP policy cannot extend to the in-the-cart price, because they incorrectly view it as the sale price, rather than a continuation of the advertised price. But there is empirical evidence that most customers are still shopping—and have not made up their minds to buy—when they place items in a cart.
According to a Baymard Institute study in 2015, nearly 70% of all online shopping carts are abandoned without a purchase.
Also, a New York federal court (the only court that ever addressed this issue) stated that a MAP policy could “reach into the cart,” as long as the prospective purchaser had a way to determine the buy price, short of actually making the purchase.
Arguably, the same logic could apply to the checkout price, at least until the shopper is committed by okaying the transaction, as there is undoubtedly some cart abandonment here prior to the commitment point. But the line does get blurrier when it comes to the online checkout price, so it is safer for a MAP policy to stop short of it.
What to do instead
Although your MAP policy does not need to extend to the shopping cart, if you would like to cover in-cart prices, you are legally free to do so in your policy, as long as a means is available for the prospective buyer to determine the price before committing to an actual purchase.
3. Relying on Verbal MAP Policies
Many manufacturers still make the mistake of simply telling their retail partners about their new MAP pricing, and failing to put the policy in writing.
Some of these manufacturers we’ve spoken with have told us they were worried that drafting and distributing a pricing policy could put them at risk of antitrust legal problems. But those concerns are usually unfounded—a properly drafted and enforced MAP policy will be on solid legal ground.
Other manufacturers worry that putting their MAP policy in writing requires them to commit to specifics, and they would rather keep things fluid. But verbal-only price policies are problematic for several reasons.
First, a verbal policy could inadvertently put the manufacturer at elevated legal risk. This is because an antitrust regulator or court might deem a manufacturer verbally discussing its MAP pricing with resellers as an “agreement,” which is on far shakier legal footing with such policies than a one-way, written statement.
Ironically, when manufacturers use verbal MAP policies because they’re concerned about the legality of putting such a policy in writing, they might actually increase—not reduce—their legal exposure.
Second, the goal of every price policy should be voluntary compliance, rather than having to enforce the policy’s consequences after resellers have violated its guidelines. But without a clear, written description of what exactly is expected, how can a reseller know whether it is following the policy?
Finally, because a reseller might have to check in periodically with the supplier with questions regarding a verbal-only price policy, the policy’s terms are likely to be squishy, changing over time, and enforced differently with different resellers. This can lead to legal problems because it can create de-facto agreements and result in favoritism (as some resellers receive better treatment than others)—behaviors that can bring a manufacturer close to the antitrust line.
What to do instead
Draft a clear, straightforward MAP pricing policy—as a unilateral statement, rather than a two-way agreement—and enforce it consistently.
Want more insights on dos and don’ts with your MAP policy?
Read our free book: How to Draft and Enforce a Successful Reseller Pricing Policy.