If you’re a manufacturer or brand owner interested in developing a policy governing how your resale channel advertises and sells your products, you’ve probably been told that you need a MAP policy. But is that correct in your company’s specific case? You may also happen to hear about a Unilateral Pricing Policy.
Minimum Advertised Price policy — “MAP” — has become a catchall term used to describe any type of reseller policy. But the truth is, there are several forms of pricing policies available to manufacturers and brands, and MAP might not be the right one for you.
What is Unilateral Pricing Policy (UPP)?
First, unlike MAP agreements, a UPP is always a one-way policy. That’s why it is called unilateral: The policy does not constitute an agreement between the manufacturer and reseller. Both the manufacturer and reseller are independent actors under this policy, both free to do what they want. We’ll discuss this in more detail in the legal section below.
The second way a UPP differs from a MAP policy is that applies to both advertising and resale pricing. With a UPP, the manufacturer sets out — unilaterally, and without any discussion or negotiation with its resale channel — the prices it will allow resellers to advertise and sell its products.
Because the UPP covers everything, the manufacturer doesn’t need to worry as much about specifying exactly what it considers advertising versus resale pricing (e.g., “Click here for best price”). The minimum prices listed in the UPP represent the minimum prices a reseller may list those products anywhere — on its sales pages, in online marketplaces like Amazon, in the cart and out of the cart, in its physical stores, in magazine ads, etc.
Finally, the third distinction from MAP policies is that a Unilateral Pricing Policy (UPP) may give the manufacturer a broader range of legal options for enforcing consequences. Whereas with MAP the brand is often limited to withholding cooperative ad funds, a UPP can include all manner of consequences for violators — up to and including refusing to supply that reseller with inventory going forward.
To recap, here’s an overview of the important details of a UPP.
A Unilateral Pricing Policy’s Key Characteristics:
- It is written as a one-way policy — not an agreement. Both manufacturer and reseller are independent actors. This makes a UPP much safer legally because by definition it is a one-way statement and therefore far less likely to raise any antitrust red flags.
- It covers both resellers’ advertised prices as well as their actual resale prices. This can eliminate a lot of confusion about where manufacturers will draw the line in terms of what constitutes an advertised price and what constitutes resale price.
- Because it is unilateral, and cannot include agreement or negotiation with resellers, a Unilateral Pricing Policy (UPP) should not include escalating punishments for the same violator — such as the “3 Strikes and You’re Out” that you might see in a MAP policy. This could be deemed as building an agreement into the statement, which could expose the policy to antitrust risk.
Minimum Advertised Price (MAP) Policy
As its name suggests, Minimum Advertised Price (“MAP”) is a policy written to let resellers know the lowest prices a manufacturer will allow those resellers to advertise its products. Here’s what you need to know about the typical MAP policy.
A MAP Policy’s Key Characteristics:
- It sets limits only on the prices resellers may advertise a brand’s products. Resellers remain free to actually sell the products at whatever prices they choose.
- It has traditionally been structured as a bilateral agreement. In fact, MAP policies are often written as contracts, signed by both the manufacturer and reseller.
- The reason MAP policies — also called “MAP programs” — are executed as two-way agreements is that they are typically used when the manufacturer is offering cooperative advertising dollars to retailers, and those ad dollars can be tied in part to the retailer adhering to the manufacturer’s MAP pricing.
- Because MAP policies are traditionally based on cooperative advertising funds, the manufacturer’s only recourse for dealing with violations — the only consequence they have historically been able to include in the policy’s language — is to withhold some of their ad money from a retailer who advertises products below the MAP-approved levels.
Why A MAP Policy Might Not Be Right For Your Company
As you can see, a MAP policy is limited in several ways and will therefore be the right policy only for certain manufacturers and brands.
For example, if your company does not offer cooperative advertising dollars to your resale channel, MAP might not be the policy for you.
Additionally, if you have identified resale-price erosion as your major issue with resellers — meaning the actual prices they’re selling your products, as opposed to how they’re advertising them — then you might find a MAP policy too limited for your company. That MAP policy won’t, after all, allow you to dictate in any way the prices your retailers actually sell your products — only how they advertise those products. It is one of the reasons to consider a Unilateral Pricing Policy strategy for your business.
Also, as we’ll discuss below in more detail, U.S. law tends to view advertising as stopping at a store’s front door. Any reference to pricing within that store’s walls — signage, price tags, even discount announcements blaring over the PA system — all constitute “resale price,” not advertising. Once the customer has stepped inside a retailer’s store, the thinking goes, that retailer is no longer advertising to the customer — they’re selling to her.
But this distinction creates a lot of confusion on the Internet, where a store’s “front door” might well be an eCommerce retailer’s home page. You can draft your MAP policy to prohibit a retailer from tactics like offering “Add to cart for lowest price,” where they’ll display below-MAP pricing, but you’re not guaranteed that such a clause will stand up to a legal challenge.
And finally, drafting a MAP policy in its traditional form — as a bilateral agreement that you’ll ask your resellers to sign — also poses some legal risk. Any agreement between brand and reseller could be deemed a violation of antitrust law. Generally speaking, as long as your MAP policy follows best practices and you enlist the help of experts in drafting and enforcing it, you will likely remain on the right side of the law. But you’ll never know for sure until your policy is challenged.
This is why, based on our experience, and our extensive work with antitrust legal experts, we believe that in most cases the best strategy will not be a MAP policy or any type of reseller pricing agreement. It will be a Unilateral Pricing Policy.
So, Which Policy Should You Choose?
Confused? We understand: This stuff can get murky in a hurry. Many businesses ask for a MAP policy when what they need is something else. Some companies simply copy a MAP agreement from the Internet, call it a Unilateral Pricing Policy, and then publish a pricing statement that is on-its-face a violation of federal antitrust law.
Our brand protection experts can help you sort through these issues and find the optimal reseller pricing policy for your company. But in the meantime, here’s a quick checklist you can run through to gain a better sense of which policy makes sense for you.
- My company offers cooperative advertising funds to our resale partners. (MAP)
- We’ve identified the real problem as an online advertising price war for our products. (MAP)
- We’re uncomfortable putting any pricing policy into agreement form because we want to absolutely minimize legal risk. (UPP)
- We want the freedom to change our pricing policy as often as we want — and without having to update our agreements with resellers every time we do. (UPP)
- We want to protect our brand from the erosion of both advertised and resale prices. (UPP)
Want to learn more about Minimum Advertised Price (MAP) and Unilateral Pricing Policy (UPP)? Download our free eBook – how to draft and enforce a successful reseller pricing policy.
For a more detailed discussion of MAP, click here.