Businesses often approach us here at TrackStreet because they want help rolling out a “MAP policy.” That’s the term they hear and read everywhere relating to reseller pricing and brand protection in general, so that’s the term they use with us. Often, however, what these businesses actually want is a different type of policy for managing pricing within their resale channel: a Minimum Resale Policy, or MRP.
Let’s review these policies and then discuss the reasons that one (or the other) might be more appropriate for your company’s specific goals and needs.
What is a Minimum Advertised Price (MAP) Policy?
“MAP” is probably the reseller pricing program you’re familiar with. As its name suggests, a Minimum Advertised Price policy allows a manufacturer or brand owner to set a floor on the prices its resale partners can advertise the company’s products — but this policy says nothing about the actual resale price.
When it comes to physical, brick-and-mortar stores, antitrust law typically draws the line between an “advertised” price (also referred to as an “offer”) and the actually “resale” price literally at the retailer’s front door. Anything outside the retailer’s walls — newspaper ads, flyers, radio spots and even emails or text messages sent to customers or list subscribers — are all considered ads or offers. There are variations of MAP policies, called iMAP policies, which cover Internet pricing, and eMAP policies, which can include Internet, emails or texts. But these all govern advertised pricing outside the store.
Any references to a product’s price within the retail store’s walls, on the other hand, would constitute a resale price — and this would include in-store signage, a discount announcement broadcast over the store’s PA system, or even a price negotiation that takes place at the checkout counter.
Online, MAP policies can cover all publicly viewable prices — which, contrary to a common misconception, does include the shopping cart. This is because an online customer placing an item into a shopping cart is still, strictly speaking, shopping — particularly if the eCommerce site encourages this with a message on the sales page such as, “Add to cart for best pricing!”
Where a MAP policy cannot reach (but an MRP can) is into the online checkout process. At this point in the transaction, the thinking goes, that retailer is now presenting an actual resale price — not an offer.
What is a Minimum Resale Price (MRP) Policy?
MRPs — Minimum Resale Price policies, sometimes also called Minimum Retail Price policies — are far more comprehensive in that they set limits for resellers on both advertised prices as well as the actual selling prices of the manufacturer’s products.
Online, this would include every price reference, up to and including the price the customer sees at checkout. If the retailer wishes to adhere to an MRP (and we’ll explain below why the company doesn’t have to), they cannot sell the manufacturer’s product below its MRP-approved price.
In the brick-and-mortar world, an MRP would apply to all prices — both outside the store (where the MAP policy is in effect) and within the store’s walls. This means a retailer adhering to a manufacturer’s MRP cannot post store signage or price tags, for example, offering products below the MRP amounts.
Why Would a Manufacturer Choose MAP? Or MRP?
The key distinction between MAP and MRP policies is the type of pricing they cover. MAP policies cover offers but not selling prices. An MRP covers both.
So the primary reason a manufacturer would choose a MAP policy is if the company were worried only about public perception and the damage to its brand that could result from retailers advertising its products at unacceptably low prices.
A manufacturer would opt instead for an MRP if the company were concerned not only with the risk to its brand from embarrassing levels of public discounting, but also with protecting its margins and the margins of its resale channel — which could be jeopardized by resellers undercutting each other’s resale prices, even if those companies were honoring the manufacturer’s advertised-price minimums outside the store.
How MAP and MRP Are Alike:
The advertising-versus-resale-price distinction represents the major difference between MAP and MRP policies. But these policies are actually quite similar in many respects. For example:
1. Both should be drafted as unilateral policies and not agreements.
This is a legal necessity when it comes to a Minimum Resale Price policy, because making agreements with resellers (or even other manufacturers) when it comes to setting resale prices would be a clear violation of the Sherman Antitrust Act.
But when it comes to MAP, even though such programs can be developed as two-way agreements without necessarily landing on the wrong side of the law, few companies do so anymore. That’s because every time your company updates its MAP pricing, adds a new product to the program or updates your MAP language, you will need to have every resale partner sign the updated version of your MAP agreement, a difficult and time consuming process.
Better simply to make your MAP policy a one-way or unilateral policy statement that you, the manufacturer, can update as often as you’d like without requiring any action from your resellers.
2. Both allow for essentially the same types of consequences for violators.
Historically, when most MAP programs were based on an arrangement in which the manufacturer offered cooperative advertising money to its resale partners, MAP policies were drafted as agreements where retailers agreed to adhere to the pricing rules and manufacturers would withhold some of its ad dollars from a retailer who violated the agreement.That withholding of cooperative ad money was essentially the only consequence available to a manufacturer in these arrangements.
Today, however, because only a relative few manufacturers offer cooperative ad support to their retail partners, MAP policies can include the same escalating series of enforcement actions a manufacturer can take with its MRP policy — such as the “3 strike and you’re out” policy of dealing with violators.
3. Neither policy allows for negotiations or inconsistent enforcement.
A final example of how MAP and MRP policies are alike is the fact that, because both are unilateral policies, neither leave any legal room for manufacturers negotiating with certain retailers or enforcing the policy inconsistently with one retail partner versus another. Both of these types of actions could legally be viewed by a court as an action that converts the policy into an agreement, which is something that most manufacturers attempt to avoid.
One last difference:
While your MAP policy could survive a legal challenge even if it is converted to an agreement, it also might not. It must comply with what is called the “rule of reason,” and courts are considered the arbiters of its legality.
If your MRP policy is declared an agreement, by contrast, there is no fallback to the “rule of reason.” It is considered illegal on its face, a type of “vertical price fixing,” particularly within states like California, New York, Maryland, Michigan and Illinois, which have aggressively enforced antitrust statutes against MRPs structured as agreements. Penalties for violating antitrust law can involve severe fines and even jail time. TrackStreet strongly advises that you consult a legal professional with a specialty in antitrust law when you formulate your own policy. We can help.