“To qualify as and remain a reseller in good standing with our company, your business must agree to adhere at all times to this policy.”
If you’re not sure which of the two types of policies in this post’s title might contain language similar to the quote above — a minimum advertised price (MAP) policy, or an authorized dealer policy — this article is for you.
(Spoiler alert: It’s the authorized dealer policy.)
Many manufacturers and brands confuse aspects of these common types of reseller policies — and often mistakenly use the terms or language of one in the other. In fact, some brands actually include both policies together in a single reseller policy — a big mistake, for reasons I’ll explain below.
A MAP policy is very different from an authorized dealer policy — and to protect your brand and keep your company on the right side of the law, you need to know the difference.
In this post, I’ll define each of these policies, discuss the key difference between them, and then offer you an important tip to avoid a potential legal mistake when drafting your own reseller policies.
What is a MAP Policy?
A MAP policy is a unilateral statement written and published by a manufacturer or brand to let its resellers know the lowest prices at which the company is willing to allow these sellers to advertise its products — not sell, but advertise. Indeed, a MAP policy has nothing whatsoever to say about the prices at which a seller may actually sell its products. But any negotiation on the selling price must be a private conversation between reseller and buyer.
An important feature to understand about a MAP policy is that for it to be considered legal — and not in violation of federal or state antitrust laws — it must be clearly written as a one-way policy and not as an agreement, explicit or implicit.
Your company can certainly take action against sellers that violate your MAP policy. You can even include warnings in the language of the policy itself about the enforcement actions you’ll take against violators — cutting off further inventory, for example.
But including any language in your MAP policy that reads like a contract or agreement, like the language of the quote in the introduction to this post, could render your MAP policy an illegal instrument used for “price fixing” or “restraint of trade.”
What is an Authorized Dealer Policy?
An authorized dealer policy is a set of manufacturer guidelines dictating how a reseller interesting in joining the manufacturer’s resale channel will be required to sell, support and advertise the company’s products.
Unlike MAP policies, which apply unilateral guides only the advertised prices of a brand’s product line, an authorized dealer policy addresses all sorts of details about how its resellers are expected to treat its products. Here are just a few examples of the types of clauses you’ll find in authorized dealer policies:
- Reseller may sell our products only in its original packaging
- Reseller may sell to retail customers only, and may not sell in bulk to other retailers, wholesalers, etc.
- Reseller must provide levels of customer and sales support that reflect industry best practices
- Reseller must adhere to our brand policy in all sales and advertising materials
- Reseller must include appropriate trademark other intellectual-property symbols in all advertising and sales materials
- Reseller is expected to sell our products only in locations approved by our company, which includes not selling on any third-party eCommerce sites with our permission
The other key difference is that unlike a MAP policy, an authorized dealer policy actually represents an agreement between manufacturer and reseller.
Sometimes the authorized dealer policy will include a signature portion at the bottom, which a business hoping to join the company’s official resale channel must sign and return.
In other cases, the manufacturer will have an application that would-be resellers are required to complete — and that application will contain language explaining that by signing up for the resale channel, the company agrees to the terms of the authorized dealer policy.
In either case, the authorized dealer policy functions as an explicit promise a seller makes to the manufacturer when they sign up for their partner program.
Combining Your MAP Policy and Authorized Dealer Policy: The Big Mistake You Can’t Afford to Make
Given the legal restrictions of a MAP policy — it must be drafted as a unilateral statement to ensure you stay clear of an antitrust violation — it should be clear why it’s so important to keep this policy walled off from your authorized dealer policy.
But many brands get this wrong — mistakenly creating an authorized dealer policy that includes a MAP policy as one of its clauses. Here’s the problem with this strategy.
Let’s assume the MAP language itself does not imply an agreement. Let’s even assume the brand has drafted this “MAP policy clause” of its larger authorized dealer agreement with all of the right boilerplate messaging. They’ve added language stating, “This MAP policy has been unilaterally drafted,” for example, and even that “Our company neither solicits nor will we accept any assurance of compliance with this MAP policy.”
That would be terrific language to include in a standalone MAP policy — which every MAP policy should be.
But when the manufacturer rolls this MAP clause into its authorized dealer policy — and the authorized dealer policy requires a signature or otherwise constitutes an agreement — the manufacturer is putting itself at risk of operating an illegal MAP program.
Don’t make this mistake: Keep your MAP policy and your authorized dealer policy separate.
And if the idea of drafting, tracking, monitoring and enforcing a series of reseller policies seems too complex an undertaking, our automated price monitoring and enforcement platform can help.
