When a manufacturer drafts its MAP policy, one common fear is that the document will come across as too harsh, and that it will either scare off or turn off the company’s resale partners. But when they try to avoid this concern, many manufacturers overcorrect—and make an even bigger MAP policy mistake.
Let’s take a look at this mistake, and examine a few of the most common ways it creates problems both for drafting and enforcing a MAP policy.
3 Ways Lack of Resolve Can Undermine Your MAP Policy
The unfortunate truth is that many manufacturers are unwilling to fully stand behind their plan to prevent resale price erosion and protect their brand—which is why they set out to develop a MAP policy in the first place.
As a result, the manufacturer’s MAP policy—both in its language and in how the company enforces it—communicates to the company’s resale channel a lack of resolve, a lack of seriousness about the policy’s rules and guidelines.
As I stated earlier, this could be because the company fears that a strictly worded or aggressively enforced MAP policy might turn resellers away. Or it could be because even though the manufacturer has the instinct to protect its brand and its honorable retail partners by demanding all resellers adhere to its minimum advertised price guidelines, the company also wants to remain flexible. Maybe they want the ability to “cut some slack” to a partner who violates their policy but is also a large source of revenue.
Whatever the reason, these manufacturers often go too far in the other direction, constructing their MAP policies with such resolve that resellers intuit the company isn’t serious about preserving its minimum prices.
And you can guess what happens then: Less-than-honorable retailers will feel emboldened to violate the policy, which can ultimately lead to the very price erosion the MAP policy was supposed to combat.
Here’s what this lack of resolve often looks like in a MAP policy.
Vague Policy Language
Let’s say a manufacturer wants to have a MAP policy out there, but the company is also worried about chasing away resellers or having its own hands tied if it ever finds an important retail partner violating the policy. In other words, the manufacturer is afraid to actually demand compliance with its policy.
One thing the company might do—and we at TrackStreet have seen this many times—is to use wishy-washy, noncommittal language like “may” instead of “will.” As in, “A second violation may result in [consequence].”
Big mistake. That should read, “A second violation will…”
Using may in describing either the policy’s instructions or consequences signals the manufacturer is not prepared to enforce the policy, and it gives license to resellers not to take it seriously.
Offering Too Many Strikes
One popular approach to MAP policy enforcement is the 3-strike rule.
The details vary from policy to policy, but broadly speaking the structure works like this: A first strike will result in a warning (and possibly some additional consequence), strike 2 will lead to a more serious consequence, such as withholding inventory from the violating reseller for a period of time, and the third and final strike will result in the violator being removed from the authorized dealer list and permanently cut off from further inventory.
When they’re not comfortable with such a strong enforcement approach, some manufacturers will include not 3 strikes but 5 or 6. (Or 9!)
Big mistake. Listing too many “strikes” is another way of signaling weakness and a willingness to keep working even with a serial offender indefinitely.
The retail partner needs to see real consequences, from their very first violation, and a clear point at which repeated offenses will get them kicked out of your network altogether.
Lack of Monitoring or Enforcement
Even if you draft your MAP policy to demonstrate your company’s seriousness and resolve, you still need to monitor your resale network—and the broader Internet, to catch authorized sellers as well—and you’ll ideally want to be keeping an eye on things 24/7/365.
Additionally, if your monitoring efforts do catch violations, you’ll need consistent and aggressive enforcement. Failure to take action against MAP policy violators will create several problems and in fact can actually be worse than not having a policy at all.
First, lack of enforcement sends yet another signal to your resale partners—and the honorable ones will be particularly frustrated about this—that you aren’t serious about making sure every seller abides by your pricing rules. And of course this will likely lead to much more widespread violations of your policy, which will hurt everyone.
A related problem is inconsistent enforcement, and this problem should be the most concerning because it can actually put your company in legal jeopardy.
Big mistake. You need to both monitor and enforce your MAP policy both aggressively and consistently.
Antitrust law, legal framework under which reseller pricing policies are often judged, was designed to prevent businesses from colluding or conspiring together. So if you enforce a clause in your MAP policy against a small retailer but then let a large, longtime partner off with a warning for the same violation—even if your intentions were innocent—an antitrust regulator or court could deem this an act of conspiracy, and that could put your company on the wrong side of the law.