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Understanding UPP and MAP Authorized Dealer Programs

By: Andrew Schydlowsky (TrackStreet) October 11, 2017

When it comes to protecting your brand’s image with consumers, the price points of your products and your relationships with resellers, you have several approaches at your disposal. Two of the most common are Minimum Advertised Price (MAP) policy and a Unilateral Pricing Policy (UPP). This page will explain the differences and similarities between the two. We will also discuss Authorized Dealer Programs, which can provide you additional levels of brand protection.

MINIMUM ADVERTISED PRICE (MAP) POLICY

MAP is a policy that a brand or manufacturer puts in place to establish the lowest prices at which its wholesalers, dealers, retailers and other resellers are allowed to advertise its products. These resellers can ultimately sell MAP-protected products to customers for less than the advertised prices — through store-wide discounts or coupons, for example. MAP policies refer only to the minimum prices at which a brand’s products may be publicly advertised. A MAP pricing policy does not dictate sales price.

For a more detailed discussion of MAP, click here.

UNILATERAL PRICING POLICY (UPP)

Whereas MAP sets only the minimum prices that a reseller may advertise a brand’s products, a Unilateral Pricing Policy, or UPP, sets minimum prices at which these products can be sold.

This distinction between minimum advertised prices and minimum sale prices has important implications for a reseller. For example, a brand might not object to an online retailer presenting a below-MAP price for one of its products in a consumer’s online shopping cart — as long as the price listed on the site, the advertised price, is not below the MAP-specified minimum. As such, showing a consumer a lower price than advertised once they place the item in their shopping cart would not violate that brand’s MAP policy. (Although in other cases it would — every brand has discretion in how it crafts its MAP policy.)

With a UPP, on the other hand, the retailer would in all cases be prohibited from selling the product below the minimum amount set by the brand. They could not offer a discount (below the UPP-specified amount) on that brand’s products anywhere — not in a private online shopping cart or, in the case of a physical store, at the checkout counter.

In the cases of either a MAP or UPP, if a manufacturer or brand implements such a policy across its resale channel, and a reseller then violates that policy by either advertising the company’s products below the minimum prices stated (MAP violation), or actually selling the products below those minimum prices (UPP violation), that brand can send the reseller violation notices and warnings, or even stop selling its products to that reseller.

 

AUTHORIZED DEALER PROGRAMS AND PROTECTING YOUR BRAND

 Another way to help maintain your brand’s image and ensure uniform quality across your resale channel is through an Authorized Dealer Program. Unlike both MAP and UPP, an Authorized Dealer Program is indeed a two-way agreement, which a reseller must sign and submit to the brand.

Authorized Dealer Programs can include any number of clauses to dictate how a reseller must sell, support and advertise the brand’s products. Some clauses include submitting the brand a valid and active business license, guaranteeing to honor warranties or advertised support for the product to customers, or even a promise not to sell returned or refurbished items unless clearly advertising them as such.

Moreover, many brands and manufacturers also restrict Authorized Dealer status to resellers that have a physical retail store.

 

UPP AND ANTITRUST LAW

One common question surrounding Unilateral Pricing Policy is whether such a policy is legal, or if it violates the price-fixing rules under antitrust law.

As courts have repeatedly held, a UPP is entirely legal provided that the brand implementing such a policy indeed does so unilaterally — meaning without coordination with its distribution or resale channel.

On the FTC’s website, in its “Manufacturer-Imposed Requirements” section, the federal agency tasked with enforcing antitrust law states the following:

If a manufacturer, on its own, adopts a policy regarding a desired level of prices, the law allows the manufacturer to deal only with retailers who agree to that policy. A manufacturer also may stop dealing with a retailer that does not follow its resale price policy. That is, a manufacturer can implement a dealer policy on a "take it or leave it" basis.1

 One recent example of a brand’s pricing policy that was determined to fall outside the law was the 2015 case of Costco Wholesale Corp. v. Johnson & Johnson Vision Care, Inc., argued in US federal court in Florida.

Johnson & Johnson had a UPP in place for the resale of its contact lenses, a policy that stated J&J would stop supplying retailers that sold its lenses below the UPP-specified prices.

Costco brought suit and argued that J&J was engaged in price fixing because its pricing policies were not in fact unilateral. Costco alleged — and the court agreed — that J&J had in fact implemented its minimum pricing in response to retailer requests and complaints about discounting. The court also found that J&J had coerced Costco and other resellers into agreeing to the UPP. 2

So this is the distinction between a lawful UPP and an unlawful price-fixing plan. Such a policy is legal only when two related conditions are met.

First, the brand must act unilaterally, meaning without coordination or input from specific resellers.

Second, the brand must treat its UPP as a one-way policy and not demand its resellers enter into an agreement based on the policy’s conditions. The brand may take whatever measures it wishes against resellers that violate the UPP’s terms. But the brand cannot treat its UPP as a two-way binding agreement; such a policy would be considered coercion.

 

UPP AND MAP ARE UNILATERAIL POLICIES, NOT AGREEMENTS

 What MAP and UPP have in common is that neither of these policies can constitute a two-way agreement between brand and reseller. This is why the U in UPP stands for unilateral. The law treats both MAP and UPP specifically as unilateral policies implemented by the brand or manufacturer.

This means that violations of a brand’s UPP will be dealt with primarily by the brand itself — such as threatening to stop supplying the violating reseller with more of its products to sell. And although these policies do not constitute agreements between brand and reseller, violating some resellers can face civil repercussions, and the brand does have paths to enforcement — such as sending cease and desists warnings, or take-down notifications for trademark infringement.

 

SOPHISTICATED PRICE MONITORING AND ENFORCEMENT

 Because policies such as MAP and UPP are by law unilateral, the responsibility for monitoring and enforcing such policies falls entirely on the brand itself. The law cannot and will not help police against reseller violations.

And because a brand has so much to lose when these policies are violated — including brand image, price integrity and relationships with key resellers — the best course of action is to deploy an intelligent, automated Price Protection Solution to ensure your pricing policies are enforced consistently and proactively at all times.

Please Contact Us to discuss how TrackStreet can help you create and implement a Price Monitoring and Enforcement strategy that protects your brand and grows your business.

  

Sources:

  1. FTC: Manufacturer-Imposed Requirements

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-supply-chain/manufacturer-imposed

  1. Thomson Reuters Practical Law: Keeping an Eye on Unilateral Pricing Policy Antitrust Risks

http://us.practicallaw.com/w-000-7461

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