UNILATERAL MINIMUM ADVERTISED PRICE (“UMAP”)
MANUFACTURER’S SUGGESTED RETAIL PRICE (“MSRP”)
It is common to hear UMAP and MSRP thrown around in the same context and used interchangeably at times, but there are distinctive differences between the two. Misusing these terms can cause great confusion when communicating with sellers, so it is important to know the difference when pursuing and enforcing a pricing policy.
- WHAT IS UMAP?
- WHAT IS THE PURPOSE OF UMAP?
- IMPORTANCE OF UMAP AND AMAZON
- WHAT IS UPP?
- WHAT IS MSRP?
- DIFFERENCE BETWEEN UMAP AND MSRP
- SHOULD/CAN YOU HAVE BOTH AN MSRP AND A UMAP POLICY?
WHAT IS UMAP (IMAP, MAP, EMAP)?
Unilateral Minimum Advertised Price (“UMAP”) (sometimes referred to as Internet Minimum Advertised Price (IMAP), Minimum Advertised Price (MAP), Electronic Minimum Advertised Price (EMAP)), is the lowest price at which a seller can advertise products. Therefore, having a UMAP policy allows the manufacturer to control the cheapest price that their product can be advertised. This is enforceable when the manufacturer holds a Reseller Agreement with the seller.
WHAT IS THE PURPOSE OF UMAP?
A manufacturer usually decides to establish a UMAP policy for its products when it wants to standardize its products’ value across the company’s resale channel. Having a UMAP policy allows a manufacturer to enforce repercussions when its distributors and sellers advertise their products below UMAP, such as terminating their business with the seller.
Defining the lowest price that a product should be advertised is beneficial for several reasons.
1) PROMOTE FAIR COMPETITION ACROSS ALL DISTRIBUTION CHANNELS – UMAP not only benefits the manufacturer, but also the sellers that sell their products. Having a strictly enforced UMAP policy will eliminate price wars among sellers by defining the bottom level price at which a product should be sold. All sellers benefit when they do not lose profit due to competitive pricing. This is especially beneficial for brick-and-mortar sellers, who often struggle to compete with online retailers that do not have the overhead that comes with having a physical store. UMAP policies allow brick-and-mortar stores and online retailers to be able to offer the same competitive price.
2) PROTECT SELLER MARGINS – Sellers will not have to drop their prices and profit margins to compete with the price offered by another merchant selling the same product. Having a UMAP policy creates a level playing field for sellers. With pricing out of the equation, the difference between sellers comes down to availability, proximity to the consumer, customer service, and the shopping experience.
3) MAINTAIN BRAND IDENTITY AND VALUE – Enforcing a UMAP policy will regularly address sellers that bring the value of products down by advertising them below their value. This can be a tedious task for a brand to take on, but with TrackStreet and our leading brand protection Software as a Service (“SaaS”) platform, we can streamline the MSRP enforcement process for your brand.
Unfortunately, UMAP policies cannot be enforced on unauthorized sellers with much success because these sellers do not have signed agreements in place with the manufacturer. There are limited actions available without getting an attorney involved. However, if a company can determine that one of its authorized distributors is supplying unauthorized sellers, having a UMAP policy in place provides an avenue to terminate the partnership with the problematic distributor, and stop the supply to the unauthorized sellers.
IMPORTANCE OF UMAP AND AMAZON
Most brands are excited about the opportunity to sell their products on Amazon, the world’s largest online retailer. However, most brands quickly run into the problem with Amazon’s pricing model to keep prices as low as possible for consumers. If Amazon can find another merchant offering product(s) at a lower price, they will match it.
Enforcing a UMAP policy will help control the ecommerce marketplace pricing on products, which in turn will affect Amazon’s pricing. While there remains no quick fix for this situation with Amazon, having a UMAP policy in place is foundational for pursuing brand protection initiatives.
Before we move on to breaking down MSRP, it is important to also be familiar with Unilateral Pricing Policy (“UPP”).
WHAT IS UPP?
Unilateral Pricing Policy (“UPP”) sets out to accomplish the same purposes as UMAP with the exception that UPP does not utilize any form of agreement. You may also hear UPP described as a “one-way policy” because it allows manufacturers and resellers to stay independent. A company with a UPP policy announces their policy and unilaterally enforces the conditions of the policy. Unlike a UMAP policy, a unilateral policy does not include an agreement with sellers, although manufacturers can have Reseller Agreements in place as well.
Is a UPP legal? The answer is, yes. A Unilateral Pricing Policy is sometimes referred to as the “Colgate” policy, because when the United States sued Colgate in 1919 (United States v. Colgate & Co., 250 U.S. 300, 307), the Supreme Court recognized that (1) a company has the right to choose who they do and do not want to partner with and (2) that it is the right of the company’s customers and distributors to choose the price they want to advertise and sell product.
A UPP essentially states that the company will choose to partner with customers and distributors that comply with their unilateral policy on the pricing of their products among other things.
WHAT IS MSRP?
Manufacturer’s Suggested Retail Price (“MSRP”) represents the greatest value that a manufacturer recommends its retail partners sell its products. Some refer to MSRP as the “sticker price.”
Many people become familiar with the term MSRP when purchasing a car. When purchasing a vehicle, people research to ensure they are not paying over MSRP and are quick to expect a rebate or discount from that price if the vehicle is priced over MSRP.
“Although the MSRP is the suggested price, dealers have the freedom to ask more or less than this figure. If a car is in high demand, a dealer might include a market adjustment, which will increase the vehicle’s price beyond the suggested price. The dealer can do this because they feel that the market demand is high enough to ask for more than the manufacturer’s suggested price of the car.”1 This can also be applied to retail.
DIFFERENCE BETWEEN UMAP AND MSRP
The key difference between UMAP and MSRP is that UMAP determines the lowest amount a retailer should advertise a product, and MSRP is the recommended consumer price that the retailer should sell the product.
Over time, having a UMAP Pricing Policy and MSRP in place have proven effective to protect a brand’s integrity and hold its value. Consistency is key. Consistent messaging and consistent MSRP enforcement to sellers will create the brand protection foundation every company desires. TrackStreet’s robust software can provide the consistency it takes to accomplish this goal, with 24/7 monitoring and enforcement of your UMAP policy.
However, UMAP policies are not a cure all. Unfortunately, there is no simple solution and approach for brand protection. Continued UMAP pricing violations should be expected among authorized and unauthorized sellers even when a UMAP policy and enforcement have been put in place for a significant amount of time. Even good partners may neglect to update a listing on their website after a price increase. TrackStreet can help address violations and ensure your sellers are informed after each price increase or adjustment to your policy. We can help you maintain good relationships with your business partners as you navigate these changes.
SHOULD/CAN YOU HAVE BOTH UMAP AND MSRP INCLUDED IN PRICING POLICY?
If your company is concerned about the issues raised here—jeopardizing margins and retailer relationships, online price erosion undermining the public’s perception of your brand, etc., then a pricing policy may be in your best interest.
Both MSRP and a UMAP policy can be utilized by a manufacturer without the fear of being seen as price-fixing. The key is the way they are communicated with sellers. TrackStreet automates violations, ensuring your UMAP policy is enforced unilaterally and preventing the need to contact violators directly, which may put your company at risk of being accused of price-fixing, restraint of trade, or other forms of anti-trust behavior that might compromise your business. The TrackStreet Team can help navigate and guide you as you announce, implement, and enforce a UMAP policy.
Pro Tip: Find The Right Brand Protection Solution
As you can see, there are many complexities, nuances, and important strategic decisions to make just when trying to develop your UMAP pricing policy. And those decisions only grow more complex as you try to monitor the retail landscape effectively, enforce your MAP guidelines, avoid legal pitfalls, and deal with unauthorized sellers on Amazon and elsewhere online.
For these reasons, your best bet is not to try to go it alone. Instead, find the right automated UMAP pricing and brand protection solution to help you with all of it.