Minimum Advertised Price (MAP) Policies 

In the previous module, we introduced you to the primary types of reseller pricing policies, and by far the most commonly used policy on that short-list is the Minimum Advertised Price (MAP) policy. So in this module, we’re going to take a deep dive into MAP, including discussions about:

• What a MAP policy is (and what it isn’t).
• The benefits of having a MAP policy.
• The legal issues surrounding MAP.
• Best practices for drafting and enforcing a MAP policy.
• Common mistakes manufacturers make with their MAP policies.

 

What Is a MAP Policy?

The MAP policy is one of the most misunderstood business documents ever developed. Many manufacturers expend a lot of effort drafting and enforcing these policies, but often in ways that are ineffective at best and counterproductive at worst. In fact, in our experience working with hundreds of manufacturers across every industry, businesses misuse the term “MAP” more often than they use it correctly, and that fundamental misunderstanding of this type of policy often leads to problems. So let’s define MAP.

Although it is often incorrectly used as an umbrella term to describe reseller pricing policies in general, Minimum Advertised Price (MAP) refers specifically to a policy in which the manufacturer sets a minimum price for the offers made by its resale partners—generally meaning the price appearing in advertisements, promotions, and on public sales listing pages online. MAP policies never cover the actual selling price, only the advertised price or “offer.” Under MAP policies, resellers are free to sell at whatever price they choose.

The next logical question, from both a legal and business standpoint, is: “What constitutes an offer or advertised price, and what constitutes a sale price?”

 

Advertised vs. resale prices: where is the line?

When it comes to the Internet, a MAP policy can apply to the price appearing on the product page or in the cart, but never the checkout price (because this is clearly the actual selling price, which falls outside the boundaries of a MAP policy). 

For brick-and-mortar resellers, a MAP policy can cover anything outside the store (direct mail, newspaper advertising, billboards, etc.), but nothing inside the store (such as flyers handed out at the door, displays or price tags). This is because, from an antitrust legal perspective, any references to products’ prices within the walls of a physical store would be considered resale price information. Once customers walk into you store, any pricing information they encounter is no longer considered an advertisement.

 

Is MAP the right policy for your company? 

A manufacturer will usually choose a MAP policy—covering advertised prices only—when the company’s objective is to establish a more-or-less uniform reference price for its products to avoid undermining its brand value and upsetting key reseller partners.

If your company’s primary concern is what prices for your products will show up during an online customer’s comparison shopping, or in such things as direct mail or newspaper ads, and you’re not concerned with the prices at which your retail partners actually sell your products, then a MAP policy will probably work for you. But if your company wants to influence both your resellers’ advertised and resale prices, you will probably want to implement the far broader Minimum Resale Price (MRP) policy.

 

MAP Policy Benefits

 There are many business benefits to drafting, publishing, and actively enforcing a MAP policy, but here are a few of the most significant.

 

1. IT PROTECTS YOUR AUTHORIZED RESALE PARTNERS

Today’s Internet-savvy shoppers are able to quickly and easily find the lowest advertised price of virtually any product sold online. This means that more than ever, retailers are forced to work on smaller profit margins. 

Moreover, brick-and-mortar stores find it increasingly difficult to compete on price with their online-only retail competitors. Another benefit of a MAP program, then, will be to preserve the ability of brick and mortar stores to sell their inventory of your products, make their margin—and continue to order from you.

A key reason it’s so important to protect your brick-and-mortar retailers is the invaluable role they play in exposing your brand to consumers who might never find your products online, and educating them about your offerings. If the physical stores drop your line because they are continually undersold by online resellers, this could hurt your overall sales and brand awareness.

Having a product line available for resale but without a MAP policy in place (or one that goes unenforced) means that your more productive resellers and your important brick-and-mortar retailers will be less likely to want to continue doing business with you. They will know that at any time another reseller can significantly undercut their prices—and leave them with inventory they cannot sell.

 

2. IT CAN DETER PRICE WARS THAT CAN HURT YOUR BRAND

Regardless of the price point of the products you offer, a key factor in creating and maintaining the perceived value you wish for those products will be your ability to ensure consistent pricing, at the amounts you want, across your channel.

Your $300 handbag advertised by a single reseller online for $139 can seriously undermine the perceived value of that handbag as a $300 item. The same thing can happen if your $49 Bluetooth speaker shows up on just one retailer’s website for $20.

If your resellers are able to advertise drops in your products’ prices to any dollar amount they want, to undercut their competitors, this can diminish the value of your brand, as your products’ pricing quickly becomes a race to the bottom. It’s highly unlikely that your brand wants to compete on price alone.

Establishing an across-the-board minimum advertised price for your products that applies to all of your resellers will help you maintain this image of quality across your product line and your entire channel of retailers and resellers.

 

3. IT CAN HELP YOU ATTRACT HIGH-QUALITY RETAIL PARTNERS

A common misconception about MAP policies (and reseller pricing policies in general) is that they are entirely defensive in nature—meaning the only reason to implement them is protect your company from problems. And although that is certainly one reason to roll out a MAP policy, it’s also worth pointing out that doing so can help create positive opportunities for your business.

For example, when you publicize and consistently enforce a MAP policy, you’re sending a clear signal to new retailers: We will protect your margins and your interests if you join our resale channel. It’s worth investing in carrying our products.

In the Internet era, when any seller honoring the pricing guidelines of its supplier can be undercut at any moment by an online rogue retailer, the high-quality retailers you’d most want as your sales partners are more likely to be drawn to your brand if you’re actively enforcing a pricing policy that would protect them against such unethical retailers.

 

4. IT CAN HELP RAISE YOUR MARGINS OVER TIME 

Many manufacturers worry that rolling out a MAP policy will create a short-term dip in their rate of sales, because the retailers who were offering the company’s products at bargain-basement prices can no longer get away with doing so—not if they want to stay on the right side of the manufacturer’s new MAP policy. And in many cases, this short-term sales drop will happen. But there’s a flipside to that coin.

The reseller pricing policy you’ve expertly drafted, and which you are now effectively enforcing, will soon clear away much of the steep discounting of your products by retailers. This means that over time your margins will increase, as consumers realize the unauthorized third-party sellers offering your products at bargain-basement prices have been driven out of the game.

And a related benefit is that, over time, as you leverage your MAP policy to maintain a consistent minimum price level associated with your products across your resale channel, your brand will likely enjoy a boost in market perception. To the extent that it is difficult or even impossible to find a company’s products available at steep discounts—think Apple or Disney, for example—those businesses tend to enjoy a greater sense of perceived value. If you draft and enforce your MAP policy properly, so can you.

 

5. IT CAN HELP YOU UNCOVER NEW BUSINESS OPPORTUNITIES

Another significant benefit of rolling out a MAP policy (assuming you are also monitoring your resellers’ activity) is that it can provide you with the market intelligence to help your company identify lucrative new sales and business-development opportunities.

If you deploy the right price monitoring solution to support your MAP policy, you can automatically capture and analyze a wealth of market-intelligence data that can show you, for example, if a retail partner is carrying some of your products but not others, or if a retailer you’re not already working with is selling a competitor’s products. Each of these scenarios could represent opportunities for your sales team to get in touch with these businesses, either to expand your relationship with them or to develop a new one.

 

The Legal Issues Surrounding MAP

 In terms of their legality, MAP policies are regulated under federal (and state) antitrust laws regarding price fixing and restraint of trade. Generally speaking, as long as you follow a few simple rules, you can develop and enforce a MAP policy that passes the legal test.

 

Why MAP policies are typically deemed legal

If you are concerned with the potential legal exposure a MAP policy could create for your business, the most important thing to note is this: As long as your MAP policy is drafted (and enforced) as a unilateral policy—as opposed to a two-way agreement between your company and your resellers—you are likely to remain on the right side of antitrust laws.

This is because all US jurisdictions (federal and state) consider unilateral price policies to be lawful, building on a 1919 Supreme Court case known as “Colgate.” (Such policies are sometimes described as “Colgate policies.”) Here is an overview of the legal logic behind this thinking:

• A product manufacturer has a legal right to unilaterally determine which companies they will do business with, and under what circumstances.
• A reseller has a right to decide, also unilaterally, at what price it will advertise and sell its suppliers’ products.
• If a reseller advertises a manufacturer’s products below the prices written in the company’s unilateral policy, that manufacturer has the right to refuse to continue doing business with that reseller.

As you might have noticed, there is a common theme applied to each step above. The standard that the Court used here was that both parties are free to make unilateral decisions, to act as independent actors, without agreements, negotiations or other types of collusion that could be deemed price fixing or in other ways violate antitrust law.

When you draft your MAP policy unilaterally, you are free to articulate not only your requirements but also the consequences a reseller will face for violating those requirements. The key is that you are making your policy unilaterally, without negotiating or colluding with your resellers, and they are making decisions about whether or not to abide by that policy unilaterally as well.

As long as your MAP policy is drafted—and enforced—as a unilateral statement, and as long as you enforce it consistently among your resale channel (no playing favorites), you will likely face little legal exposure from antitrust regulators or courts.

 

MAP Policy Best Practices 

1. DRAFT IT AS A UNILATERAL STATEMENT, NOT A TWO-WAY AGREEMENT

MAP policies can and sometimes are drafted as two-way agreements, in which both the manufacturer and its reseller sign a contract agreeing to the MAP policy’s terms.

The courts subject these agreements to the manufacturer-friendly legal standard known as the “rule of reason,” in which the practice is presumed lawful unless another party can demonstrate that it is unreasonably anticompetitive. 

The reason MAP agreements are not deemed illegal on their face is that, unlike Minimum Resale Price (MRP) policies—which establish a floor on the actual selling price—MAP policies do not seek any influence over the prices a retailer actually sells a manufacturer’s products for. That means these policies are not necessarily engaging in price fixing.

However, even though you might still be legally safe crafting a two-way MAP agreement, it still puts your company at elevated risk (even if only slightly elevated) over-drafting it instead as a unilateral statement.

Plus, executing a two-way agreement is not nearly as efficient anyway, from a business standpoint, because doing so will require your company to secure signatures from every resale partner in your network—and asking for those signatures will likely lead to plenty of reseller questions and concerns and even suspicions. Worse, every time you want to make an update to your MAP policy, if you’ve constructed it as an agreement you’ll will need to go out to all of those resellers again and ask for new signatures.

So the best practice is to draft your MAP policy as a unilateral statement.

 

2. WRITE IT IN PLAIN LANGUAGE

If you Google “Minimum Advertised Price policy examples” or a similar phrase, you’ll find plenty of real MAP documents published by manufacturers and brands. 

You’ll notice that in almost every case, these documents are short (often just a page or two) and that they are written in plain English that any layperson can understand. This is by design.

Your MAP policy will serve several purposes. One purpose, of course, will be to deter disreputable resellers from advertising your products below the prices everyone else in your resale channel is offering them — as well as to provide you with legal standing if choose to take action against a reseller that does violate your policy.

But a second and equally important function of your MAP is to signal to your reputable resellers that you are serious about enforcing your pricing policy, and that you will protect them from being undermined by shady retailers gaming the system. The best way to demonstrate this to your authorized retailers, and to those you’re trying to persuade to join your resale network, is to publish a clearly written policy that leaves no room for ambiguity, confusion or legal parsing.

Write your MAP policy as though it were for the average person on the street—not for a lawyer representing your reseller.

 

3. INCLUDE VERBIAGE TO THE EFFECT THAT THE POLICY IS UNILATERAL AND YOUR RESELLERS ARE FREE TO FOLLOW OR NOT FOLLOW IT 

This advice might sound counterintuitive. Why would you want to write language into your pricing policy that lets your resellers know they’re not legally obligated to follow it? Because if you leave enough gray area in your MAP language — such that the policy might be interpreted as attempting to sound like a two-way legal agreement — then you could be leaving your company exposed to an antitrust challenge at some point in the future.

The safest way to craft your MAP policy to ensure that it is both enforceable and still on the right side of antitrust law is to explicitly acknowledge that your company recognizes your resellers can do what they want. You should add, however, that your company is also free to do what it wants to enforce your pricing policy — including taking action against violators.

Nor should you worry that including language like this will encourage MAP violations. Your authorized retailers (and other reputable companies who sell your products) are not avoiding violating your pricing policies only because they think doing so would be illegal. They also understand that a violation could cost them access to your product line and harm their bottom line. At the same time, the shady resellers who would violate your pricing policy will do so regardless of what your MAP states.

 

4. STATE PROMINENTLY THAT THIS POLICY PROTECTS YOUR RESELLERS

Your MAP policy should, of course, establish guidelines you expect your resellers to follow with regard to how they advertise your products. It should even outline the consequences you’ll enforce for failing to follow those guidelines. But that doesn’t mean the policy needs to read like bad news for your resellers, or that your company views them as adversaries.

You are drafting this policy in large part to protect the interests of your resale channel, after all. So state that clearly in the policy—ideally, right in the introduction. 

Some of the most effective minimum advertised price policies we’ve reviewed take this approach, opening with a plainly worded statement explaining the company believes it can best serve both its own interests and the interests of its retailers or dealers by implementing these minimum advertised prices across its entire resale channel.

 

5. BE CLEAR ABOUT WHAT CONSTITUTES COMPLIANCE (AND NON-COMPLIANCE)

There is plenty of confusion, among both manufacturers and their resellers, about what constitutes an “advertised” price in a minimum advertised price policy. The question of where to draw the line becomes even murkier when a product is being sold online.

Some resellers believe that a “Click here for discount pricing” message would not constitute a MAP violation, as long as the price displayed in the ad itself or on the sales page were at or above the manufacturer’s MAP-approved level.

Some manufacturers aren’t sure themselves of where to draw the line, and a clear answer has yet to emerge from legal precedent to help settle the matter.

So as a manufacturer crafting and enforcing a minimum advertised price policy, it will be up to your discretion as to how you want to set your guidelines.

Will you choose to tell your resellers that by publicly offering rebates on your products (which take the products’ true prices below your MAP levels) will be unacceptable? Will you allow your retailers to offer “See price in shopping cart” messages that then offer your products for below-MAP prices? Will you decide that your resellers may offer their customers financing on your products and will still be in compliance with your MAP policy?

Setting all of these guidelines will be up to your company’s discretion. But you can’t leave these questions for your authorized retailers to answer for themselves. You need to include a clear explanation of each of them, so your resellers know exactly what they need to do to stay on the right side of your minimum advertised price policy.

 

6. INCLUDE A MAP FAQ SECTION IN YOUR POLICY AND ON YOUR WEBSITE

One of the legal risks of maintaining any reseller policy is that a conversation between an employee at the manufacturer’s company and someone representing a reseller—even if the conversation is completely innocent and in good faith—can in effect turn the unilateral pricing policy into an agreement.

This is why it’s a good idea to draft a set of FAQs (Frequently Asked Questions) to answer the most common inquiries a reseller might have about your MAP or MRP policy. If you can direct a reseller to these FAQs, you can minimize the direct contact that reseller will have with your staff, and minimize the chances for a well-meaning employee to accidentally agree to something with that reseller that effectively renders your pricing policy an agreement.

Note: Common to a common misunderstanding, a manufacturer can speak with a reseller about the company’s MAP or MRP policy. That manufacturer just has to be mindful about not saying anything that could be construed as an agreement. This is why our next recommendation is to establish a policy administrator to act as the company’s main point of contact for reseller conversations about the policy.

 

7. ESTABLISH A MAP POLICY ADMINISTRATOR, AND DIRECT ALL RESELLER COMMUNICATIONS ABOUT THE POLICY TO THAT INDIVIDUAL

 For all reseller communications regarding your company’s MAP or MRP policy, you should assign a single point of contact: the “policy administrator.” 

This is another way of limiting your staff’s exposure to having legally risky conversations with resale partners that could inadvertently put your company on the wrong side of antitrust law.

Once this policy administrator role has been established, that individual should be the first point of contact for all policy-related discussions with resellers and should be responsible for limiting these communications to personnel at your company who have been trained to handle such discussions with an understanding of the legal risks involved.

 

8. AGGRESSIVELY PUBLICIZE YOUR POLICY, BOTH ACROSS YOUR RESALE NETWORK AND MORE BROADLY THROUGHOUT YOUR INDUSTRY

A critical component of the success of your new minimum advertised or resale price policy is making sure your resellers know about it.

This should include sending out the policy to your resale network directly, as well as issuing a press announcement about the policy (which also has the added benefit of attracting new resellers).

 

9. AUTOMATE THE MONITORING AND ENFORCEMENT OF YOUR POLICY, AND MAKE SURE IT’S “ON” 24/7 

No matter how well you craft your MAP policy’s language, or how prominently you publicize it for your current and future resale partners, the policy itself won’t do your company much good—and could even be harmful—if you don’t also aggressively and consistently enforce it.

But how can your company constantly track and monitor all of your products’ advertised prices, across all of your resale partners’ websites as well as all of the online marketplaces, at all times? Moreover, how can you ensure that even if your team catches a violation of your pricing policy, they will know exactly how to respond appropriately in that specific situation?

The resources—people, time, expertise—needed to effectively monitor and enforce a MAP or MRP program are simply too great for most businesses to manage the process in-house.

It simply does not make sense for a brand to assign dedicated teams to manually check in constantly, around the clock, with every reseller to make sure none are trying to unfairly undersell their competitors by violating your MAP policy.

The best practice, instead, will be to deploy an automated MAP monitoring and compliance platform—one that continually scours the Internet checking on how your products are being advertised, catches violations and automatically takes the necessary steps to begin the enforcement process on your behalf.

In other words, don’t leave your pricing enforcement to chance. Automate as much of the process as you can.

 

Common MAP Policy Mistakes

1. PUTTING ENFORCEMENT RESPONSIBILITY ONTO YOUR DISTRIBUTORS

While it is possible to have a MAP policy that applies at the distributor or wholesale level, they are most commonly used at the ultimate reseller level—meaning applicable to the businesses that sell to end users. If you have distributors that also have their own dealer or retail operations, meaning they sell both for resale and to end users, a MAP policy would apply to distributors when they wear their dealer hat.

Sometimes manufacturers expect distributors to assume responsibility for enforcement of the manufacturer’s MAP policies or require them to adopt their own MAP policies applicable to dealers. In either case, this approach can establish an agreement on resale price. But, perhaps even more important from a business perspective, shouldn’t the manufacturer control its own policy. 

As a manufacturer, you cannot expect your distributors to monitor and enforce your price policy. The policy belongs to the manufacturer, and it must bear sole responsibility for enforcement. You can, however, ask distributors to help support a dealer-level policy by doing such things as (a) passing on communications from the manufacturer to dealers, (b) selling only to authorized dealers, (c) not selling to anyone on the manufacturer’s Do-Not-Sell List and (d) providing sales information (often referred to as “point-of-sale (POS) data”) to the manufacturer.

 

2. RELYING ON VERBAL-ONLY POLICIES

Some manufacturers make the mistake of simply telling resellers that they have adopted a MAP policy, but don’t put it in writing. Perhaps the thought is that putting the policy in writing requires the manufacturer to commit to specifics, and it would rather keep things fluid. But verbal-only price policies are problematic for several reasons.

First, the manufacturer will have no way of proving such a policy exists if the company can’t point to any documentation showing that it does. Potentially more troublesome, is there really a policy or an oral agreement on price? 

Second, the goal of every price policy is voluntary compliance, rather than enforcement. 

But without a clear description of what exactly is expected, how can a reseller know whether it is following the policy? 

Third, because a reseller might have to check in periodically with the supplier with questions regarding a verbal-only price policy, the policy’s terms are likely to be squishy, changing over time, as well as with different resellers. This can all lead to legal problems because it is more likely that the policy is really an agreement based on frequent interaction and the increased chances of negotiation that go with it. Also, it is likely that terms that vary based on the way the policy is described will mean different enforcement. 

Bottom line: Put your price policy in writing to protect your company and encourage compliance. 

 

3. IGNORING IN-THE-CART PRICING FOR RESELLERS ONLINE

Many manufacturers mistakenly believe that their MAP policies cannot apply to the in-the-cart price, because they incorrectly view it as the sale price, rather than an advertised price. But there is empirical evidence that most end users are actually still shopping—not necessarily buying—when they place something in the cart.

Indeed, when shoppers place something in their cart, they have not committed themselves to buy. According to a Baymard Institute study in 2015, nearly 70% of all online shopping carts are abandoned without a purchase.

Also, a New York federal court (the only court that ever addressed this issue) stated that a MAP policy could “reach into the cart,” as long as the prospective purchaser had a way to determine the buy price, short of actually making the purchase. The court specifically mentioned using the telephone or email to receive the actual price.

Arguably, the same logic could apply to the checkout price, at least until the purchaser is committed by okaying the transaction, as there is undoubtedly some cart abandonment here prior to the commitment point. However, it is more difficult to draw the line at checkout, so MAP policies typically stop just short of it.

Although your MAP policy does not need to extend to the shopping cart, if you would like to cover the prices in the cart, you are legally free to do so in your policy, as long as a means is available for the prospective buyer to determine the price, other than by purchase.

 

4. USING LANGUAGE THAT SIGNALS LACK OF RESOLVE ABOUT ENFORCEMENT

Often a manufacturer develops a MAP policy that fails to communicate clearly the policy specifics or a willingness to stand behind the consequences described for violations. Sometimes this is due to concern that if the policy comes across as too strict or sternly worded, it could turn off resellers. Other times, the company wishes to avoid commitment by being vague.

But a wishy-washy or superficial policy can be far worse by inviting bad behavior from some resellers because they will read an ambiguous policy to favor their own behavior and don’t believe the manufacturer will actually go through enforcing the consequences of violations. Plus, such a policy can turn off some of the company’s most important and reputable resellers, which plan to adhere to the policy, but fear that they will be unfairly undersold by various competitors that won’t comply.  

With this in mind, here are a few examples of the common ways a reseller policy can communicate lack of seriousness—all of which should be avoided: 

 

“May” vs. “Will” 

Using “may” in describing either the policy’s coverage or violation consequences signals the manufacturer is not prepared to enforce the policy, and it gives license to resellers not to take it seriously. Just as bad as “may” is “reserves the right.” The better approach is to use “will” to indicate that the manufacturer means what it says. 

 

Lack of Sting

Like using “may” instead of “will,” coming up with enforcement consequences without serious bite can have the counterproductive effect of tempting resellers to violate the policy because the penalties are minimal, even if they are enforced. 

 

Too Many Strikes 

A reseller needs to see real consequences, from its very first violation, as well as a clear point at which repeated offenses will be get it kicked out of your network altogether. Having a policy with too many “strikes” for violations is another way of signaling weakness and a willingness to keep working even with a serial offender indefinitely. 

 

Restarting The Clock 

If a reseller knows your company will reset their violation scorecard back to zero periodically (such as each year), you are giving it a free pass to regularly violate your policy—which will be particularly tempting during big selling seasons, such as the holidays. Better not to describe a reset in your policy, but, if you wish to provide amnesty at some point across the board or reinstate a particular retailer that has been cut off, just do it without an announcement in advance. (There is no obligation to reinstate all fallen resellers, as a manufacturer can determine those with which it wishes to do so.)

 

5. DEVELOPING A POLICY THAT IS TOO RIGID

At the other end of the spectrum from the policy that is too wishy-washy, there is the policy that is too rigid, which creates problems of its own.

If the violation consequences in your policy are extreme from the outset, your staff will be more reluctant to enforce such a policy over one where the severity of the consequences ramps up with additional violations. In other words, by drafting your policy with such harsh consequences even for a first violation and offering no flexibility or room for discretion, you could end up with the opposite result: a MAP policy that doesn’t get enforced at all.

Similarly, if your policy doesn’t allow any room for the ability to temporarily relax the rules for things like seasonal promotions or even for a genuine mistake by a reseller, your company likely will tread lightly in enforcement. In fact, if it does enforce such a rigid policy, your company could be missing out on revenue and important opportunities for partnership building because they violate the rules.

Bottom line: While you don’t want your MAP policy to come across as too weak or superficial, you do want it to have at least some flexibility to allow for exceptions when the circumstances (and common sense) call for them.