A highly experienced antitrust lawyer we work with at TrackStreet once told us, “Almost every manufacturer that comes to our firm looking for help drafting reseller pricing guidelines says they need a ‘MAP policy.’ But in most cases, what they need is a different policy altogether.”
This is a common misunderstanding. “MAP policy” — short for Minimum Advertised Pricing policy — has become the shorthand term used to describe any type of written statement setting the minimum prices a manufacturer is willing to let its resellers advertise its products, along with the consequences resellers will face if they violate those pricing guidelines.
Problem is, a MAP policy — which is typically drafted as an agreement signed by both parties — is the right type of reseller pricing policy under only a narrow set of circumstances. In fact, there is really only one reason to draft and enforce a MAP policy as opposed to other types of reseller policies. Do you know what that reason is?
A MAP policy makes sense only if the manufacturer or brand owner offers its resellers cooperative advertising funds.
The only situation under which a MAP policy will be right for your company is if you offer cooperative advertising dollars to your resale channel. And sticking to this rule isn’t just about selecting the best reseller policy for business purposes; it’s about protecting your company legally.
As the legal reasoning goes, if you offer your retailers financial help to promote your products, then you should be able to have some say in how those ad dollars are spent. If your retailer takes your money to advertise your products, you earn some control over the content of those ads — including the prices they contain.
Some of the most common guidelines manufacturers include in their MAP policies are:
– Demanding that a reseller accepting the manufacturer’s ad dollars agree not to advertise its competitors’ products more prominently than it does the manufacturer’s own products.
– Demanding that a reseller accepting the manufacturer’s ad money agree not to advertise its products below the company’s MAP-approved prices.
Because the manufacturer is helping to pay for the advertising of its products through its resellers, the law gives such a manufacturer more leeway in terms of influencing how those products are advertised.
But if you strip away that offer of cooperative advertising funds — in other words, if the law no longer views the advertising itself as a partnership between manufacturer (or MAP policy holder) and reseller — then this type of agreement-based policy will more likely be viewed as price-fixing and therefore a violation of antitrust law.
This is why if a manufacturer does not offer advertising money to its resale partners, a MAP policy would not be the right reseller pricing policy to draft. In fact, publishing and enforcing such a policy could be putting the company in legal jeopardy.
Even for a manufacturer that offers cooperative ad dollars, a MAP policy allows only one recourse for violations.
It’s also important to understand that even if your company offers advertising funds to your retail partners, and you decide to implement a MAP policy, the law allows only one type of recourse for dealing with violations of your advertised-price levels. That enforcement option to is withhold some of those cooperative ad dollars from the violating reseller.
Again, this comes back to the law: If a reseller violates your MAP pricing rules after taking your ad money, you can punish them by holding back some of your future ad support. But if you attempt to implement other consequences, consequences not related to your advertising dollars, then again you could find your company on the wrong side of regulators’ “price-fixing” or “collusion” line.
In fact, antitrust regulators have in the past limited even how much of a manufacturer’s agreed-upon ad dollars the company could hold back from a reseller that violated its MAP policy. Which means withholding what a court deems as an unduly high percentage of your ad support — or withholding all of it — might still put your company at risk of attracting the attention of federal or state antitrust enforcers.
For most manufacturers and brand owners, a Unilateral Price Policy (UPP) is the right reseller policy to implement.
If you’d like help assessing which reseller policy is best for your company — MAP, UPP or other — contact a Brand Protection Expert now.