When it comes to drafting and enforcing a MAP policy, there are many misconceptions and a lot of just-plain-bad information out there about what’s legal and what isn’t. One common misconception is that it is always illegal, no matter the reason, to grant a reseller’s request for an exception to your policy’s rules. The reality: It isn’t.
Are there risks to setting aside or temporarily suspending some of your own MAP policy’s rules for a reseller? You bet there are! There are several circumstances under which doing so could put your company in legal jeopardy. But contrary to popular belief, there are also instances in which making an exception for a resale partner will be perfectly legal.
This post will discuss both, and then offer some tips for making sure your team always knows how to handle one of these “Can you make an exception for us?” requests from a reseller.
When and Why Making an Exception to Your Reseller Policy Can Be Dangerous
In terms of enforcing your MAP or other reseller pricing policy on a day-to-day basis, consistent enforcement will be one of the best ways to stay on the right side of the antitrust line. And while not all exceptions you might make are necessarily illegal, as we’ll explain below, consistency in enforcement—and not making exceptions—should be your default strategy. To understand why, consider a couple of common scenarios in which you might be putting your company at risk.
When making an exception is probably a bad decision:
- One of your resellers calls to tell you they’ve had difficulty selling your newest product line and would like, just temporarily, to lower their prices below your MAP levels to see if that helps the inventory move more quickly.
- The sales team for one of your resale partners lets you know they are very close to reaching their quota, but the quarter is close to ending and they’d really benefit from the chance to advertise your line at a discount so they can create a short-term bump in sales. Oh, and if you agree, the reseller promises to make a larger-than-normal purchase order from you next time.
The risks in these examples:
- Each example above represents a clear case of favoritism and unequal enforcement among your resale channel. You are allowing one reseller to temporarily violate your MAP policy while not affording the same exception to any other.
- In the second scenario, your reseller is promising to reward your willingness to make an exception for them by making a large inventory purchase on their next order. This is a textbook case of turning your unilateral MAP policy into an agreement—and that all by itself could land you in the middle of antitrust legal action.
- Finally, when your other resellers find out you’ve allowed one resale partner to violate the MAP policy that they are all diligently following—and they will find out; they always do—you risk wrecking some of your relationships with key retail partners. This isn’t a legal risk, but it’s a real risk to your business.
What makes these exceptions unacceptable?
In these hypothetical scenarios, you are clearly playing favorites with one company in your downstream sales channel against that company’s competitors—who are also a part of your channel. This undermines the legitimacy of your own MAP policy, and that increases your risk of legal scrutiny.
So When Can You Make an Exception to Your Reseller Policy?
Okay, I promised to offer examples of when such exceptions are perfectly legal and ethical. Here are a couple of such scenarios:
- One of your retailers is having a 25th-year-in-business anniversary and asks to discount your products as part of their weeklong celebration promotion.
- A reseller calls to alert you that they mistakenly displayed one of your products on their eCommerce site at a price below your MAP-approved level, but as soon as they caught the error they fixed it. They send you a screenshot of their violation along with a link to the live sales page, which now shows the product offered at your MAP-approved price. They’re asking that you not count this violation as “strike one” because it was a mistake and quickly corrected.
Here’s why you can make these exceptions:
Unlike the previous examples, both of these resellers are facing unique situations, and neither is asking for an unfair advantage over their competitors.
Making an exception to your MAP pricing for a partner celebrating its silver anniversary is perfectly legal under two conditions.
Condition 1: You have to make sure this is not an agreement.
They can ask; you are free to say yes. But if this constitutes a two-way agreement, you could put your company in legal jeopardy because pricing policies really should be unilateral to be safe.
Condition 2: You must be willing to offer the same exception in the future to any other partner in a similar situation.
As long as you are willing to allow another resale partner a similar window of MAP-pricing suspension when they have a big anniversary celebration, you are still enforcing your MAP policy consistently.
A word of warning: Even in these scenarios, you need to be careful because you can still inadvertently run afoul of antitrust law. If you’ve already refused a similar exception to another reseller in the past, you probably don’t want to make one now—even if it seems perfectly innocent. If you’ve already refused to look the other way for a mistaken violation from one resellers, you really don’t want to do it now for another one, no matter how innocent they are. It could still represent inconsistent enforcement and create a legal risk.
Best Practices for Dealing with Reseller Exception Requests
Here are our best tips, based on TrackStreet’s experience helping hundreds of manufacturers and brands enforce their reseller pricing programs:
- Train your employees on the basics of MAP policy enforcement and how to handle questions from resellers.
- Roll out a comprehensive enforcement program to monitor and take action regarding your MAP policy.
- Appoint a MAP Policy Administrator, someone who understands how to handle pricing-policy questions and requests from resellers, and who knows exactly where the legal lines are. Remember: members of your sales team must not negotiate “exceptions” to the reseller policy that might be classified as agreements.
Instruct your staff to direct all such reseller inquiries they receive to this Policy Administrator—so your company is always speaking on these complex legal issues with an informed and consistent voice.
The legal lines in these instances aren’t always easy to identify. If you’d like help legally strengthening your company’s reseller policy strategy, let us know.