Over the past 15 years or so, minimum advertising price policies (MAP) have been adopted by tens of thousands of brands. It is one of the most important brand protection strategies that a company can adopt to avoid price erosion, the loss of brand equity, and the devastation of retail margins.
Although some retailers (generally the ones that have been suspended for MAP violations) complain that MAP is an illegal price-fixing scheme violating Antitrust Laws, the US Supreme Court disagrees. These unilateral policies have been deemed to be not illegal by the US Supreme Court in the Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) case, wherein they overruled a century-old precedent and held that minimum resale price maintenance (RPM) is not technically illegal under Section 1 of the Sherman Act.
Of course, if implemented improperly, companies can run the risk of getting into hot water. That’s why it’s important to always consult with an attorney that understands the legal ramifications of unilateral pricing policies. In the meantime, based on our experience working with hundreds of companies, here are some top-level things to bear in mind that will keep you on the right side of the law. We’ve thrown in a couple of best practice tips as well.
Make it a Policy, Not an Agreement
MAPP is an acronym for Minimum Advertised Price Policy. Note the word, “Policy.” It’s right in the name. It is not an agreement, a discussion, negotiation or another type of strategy that involves the retailer’s consent. It is a unilateral statement of your brand’s requirement to do business. Therefore, do not get retailers to sign your MAPP; that implies an agreement. You may have them sign a statement that says they received the MAPP but that’s as far as you should go.
Avoid Using the “P” Word
Again, it’s in the name. MAPP pertains to the “Advertised” price of a product, not the final sale or retail price. You must train yourself and your stakeholders to say “advertised price” or “list price,” not “sale price.” This is a simple, but important distinction to make because there are MRP policies that dictate the actual sale price (think Apple or Coach bags).
Don’t Negotiate with Violators
As a policy, MAPP is non-negotiable. The person (and it should be just one, dedicated individual) that deals with MAPP violations and issues should be instructed to not get lured into a conversation with individual violators. Many retailers will play the blame game and point to other violators (or blame their repricing bots) in order to avoid being penalized. That doesn’t matter. They broke MAPP, they are being penalized according to your internal MAP enforcement strategy. You will deal with the others separately.
Don't Use an Advertised Pricing Policy Found on Google
When it comes to MAP there is no one-size-fits-all. It’s not Mad Libs. It may seem easy and inexpensive to just plug your company’s name into a peer’s policy but what if the peer’s policy isn’t legally correct? What if they got it the same way you got it? Also, not every brand will use the same penalties, enforcement strategies or even cite the same reasons for having the policy. It really is best (and safest) to get the assistance of legal counsel to mitigate legal risks.
Don't Mix and Match Policies
Today’s brand protection and pricing strategies involve creating policies on multiple fronts. In addition to MAP Policies, brands adopt Authorized Resellers policies, more robust Distribution Agreements, and they update their Terms and Conditions. It’s very important, however, NOT to include adherence to MAP as a factor for continued authorization in other policies.
Avoid Setting Unrealistic Expectations
For many brands, deploying a MAPP has to do with improving already damaged margins and retailer relationships. The objective is to increase advertised pricing and do it fast. Unfortunately, unless the brand has 100% visibility and control of its product distribution, that’s not realistic. If average advertised prices are already 25% too low, then expecting to improve that by 20% overnight is not achievable. Increases like that can absolutely be achieved but it’s important to use data, an incremental approach and have disciplined patience.
Don’t Enforce Against Unauthorized Sellers
It’s important to your success that you know where to focus. MAPP is not about getting rid of sellers; it’s about raising the advertised prices of your products to improve margins and brand perception. You really don’t want to get rid of wanted and known sellers. Therefore, sellers that you don’t want have nothing to do with MAPP. They just need to be gone. You can, of course, just stop selling to companies, at your discretion, but using MAP to do it is not the way. Unauthorized/undesired/unknown sellers should be treated differently.
Don’t Punish Yourself
Last, but certainly not least, as previously stated, MAPP is not about getting rid of sellers. It is about improving profits and bolstering brand value. It’s an important objective. That being said, it’s important that you understand your company’s tolerance for pain. If you don’t want to suspend a lot of customers all at once, then implement a three-strike policy. If you want to avoid losing revenue then avoid an all or nothing approach. You can suspend accounts on the product line level. And lastly, don’t make the suspension process too onerous on your internal stakeholders or sales team. Cutting off a seller on the product level or having a lot of incremental penalties makes things confusing and is an invitation for mistakes. Keep it simple.
When adopted and enforced properly, for the right reasons, and with realistic expectations, MAPP can accomplish its main objectives: stable margins and improved brand perception. It will also make you, your retailers and the consumers that purchase your products happier, less confused, and more brand-loyal.