Legal Briefs #1 - Is MAPP a Policy or an Agreement?

Transcript:

Ron: Hello there and welcome to another edition of Legal Briefs where we talk about issues that are important to consumer brand manufacturers about online brand protection. Challenges like MAP policies and authorized reseller policies and speaking of MAP policies, Jeremy is with us today, as always, our legal guru, Jeremy, you're on.

Jeremy: Nice to see you. Nice to hear your voice.

Ron: You too. So there seems to be a bit of confusion. Let's talk today about policies versus agreements. Okay, there seems to be a bit of confusion regarding policies and agreements as they pertain to minimum advertised prices. So, the first of all is one of them better than the other, is one of them legal, is one of them not legal? What can you tell us about these policies and agreements and the differences between?

Jeremy: Sure. Well, it's right in the name “MAPP,” minimum advertised price policy. The second “P” is for policy. It is an important distinction, the difference between policies and agreements. A policy is a unilateral policy set by the company, in this case the brand owner, the manufacturer. An agreement involves two or more people. So, an agreement between the manufacturer and the retailer to do something is just that. That's an agreement that is bilateral or multi-lateral. With our MAP policy, we want to be absolutely clear that it is unilateral, that it is the policy of the manufacturer, and that the retailer can but doesn't have to abide by the policy, because it is not a bilateral agreement.

Of course, the manufacturer who has the policy, would like the retailer to abide by the manufacturers policy and if the retailer chooses not to abide by the manufacturers policy, the manufacturer has a number of options, including stopping sales to that retailer. And let me put a little note on there, if we have orders placed by the retailer that we manufacture have accepted, we need to fill those. We need to ship those goods because otherwise there's a breach of contract. Remember, that's an agreement, purchase sale agreement. But the policy that we want, we want the retailer to follow because it's unilateral, retailers can choose to follow or not. And the manufacturer can choose to stop selling if it is. If it is a violation of their MAP policy.

Ron: There are some brands that will send out a MAP to their retailers and require a signature. Does that signature imply an agreement? Does that shift it from a policy to an agreement?

Jeremy: Yes, I think it does and that's a that's a no-no, that's a bad idea. You do not want to have your MAP policy including a signature line for the retailer to sign because that does, in my mind, shift it over to agreement as opposed to policy. There the retailer is essentially signing on to say, yes, I agree to abide by your policy, and once you have that agreed in there, then it's an agreement not. So, with a minimum advertised price policy, that's a bad idea. You can, however, ask a retailer to acknowledge receipt of a MAP policy, but I wouldn't have a signature line on the MAP policy saying you must sign here and return it acknowledging receipt. You might simply say hey, I'm sending this to you via email, please acknowledge receipt. Or send me some confirmation that you received. That's okay, but again, I would stay away from a signature line on your MAP policy for the retailer to sign and return.

Ron: So, what happens in the event that the retailer does not acknowledge that they've received it.

Jeremy: There again you have the manufacturer or the brand owner left with an option of how to enforce their MAP policy. And, if it is so important to the manufacturer that the retailer acknowledge receipt, the manufacturer might say, “I'm not going to ship your goods until you acknowledge receipt.” That's an option. Sometimes a tough call, and I think it's a very tough call for all of these brand owners and manufacturers to decide when and how to enforce their MAP policy and to have the courage to ultimately cut off a retailer if they are not abiding by the policy. But that's the choice of the manufacturer, and that's what the policy is there for.

Ron: That's a great strategy. I like that. I think we'll recommend that to our clients. It's a really great strategy. Legally speaking though, is a MAP agreement legal? I've heard that it is not legal in certain states, although policies are legal in all states.

Jeremy: So, I can't give an answer for all states. I have not done a fifty-state survey. I would say that a MAP agreement is markedly different from a MAP policy. And once you get into agreements about prices it, to me, goes over the line into price fixing. And that's something that none of us as manufacturers and brand owners want to do. We don't want to tell the retailer what they must charge or a minimum price that they must charge for a product. That is not a good idea, because then you can end up receiving a letter from state Attorney General's office or the Attorney General of the United States saying you're in violation and then you're in a world of hurt. You don't want to be there.

Ron: And we surely don't want to be there. Okay, while we're on the topic of policies and agreements, many brands are implementing authorized reseller agreements. And, what they're doing is they are including adherence to a MAP policy as one of the stipulations to remain authorized. Is that something that you recommend against, or for, or are you neutral?

Jeremy: Rights. So, I'll start by answering the question and saying I do not recommend that. I do not recommend having a reseller policy or retailer agreement that incorporates, by reference, the minimum advertised price policy, because there again when you have the agreement and the MAP policy is incorporated by reference, you convert the MAP policy to a MAP agreement and again don't want to be there.

But you raised an interesting point, which should be a topic for at least one more podcast, which has to do with reseller policies and terms and conditions of sales. And the point here is that the minimum advertised price policy is just one part of a number of documents that make up a good relationship with your retail partners.

Ron: Okay, that's great. I have one more question. Do you think there are certain must-haves that a MAP should include?

Jeremy: Yes, I do. And the first part being, this is not a requirement that you charge a particular minimum price, it is just it is our policy and of course you, retailer, set the actual price that you charge yourself and we don't tell you what to do. So that's an important part to, again, distinguish between this being a policy and this being some sort of agreement or the manufacturer brand owner telling a retailer what to charge. We don't do that.

I think it's important also to have a statement in the policy that one particular person will be responsible for fielding or responding to questions, comments from the retailers. You don't want your entire sales force responding to all your retailers or different retailers. You really want to consolidate that conversation chain. So, I would recommend having a statement that says only Jeremy will discuss this policy with you or only Ron, or only fill in the blank. And you need to instruct your sales team that that is the case and if a customer calls them and says, “hey, what about this MAP policy?” the salesperson should refer it on to Ron or Jeremy or whoever that person is.

Other items that you want to address in the MAP policy are how retailers will find the MAP prices. Are they going to go to your website? Are they going to get a list emailed to you? Is there some other way this is going to be communicated to them? And if it's on the website you want to make sure that retailers are told they should go back to that website with some frequency to make sure that they have the latest MAP prices.

You may want to address MAP holidays if you are going to allow your retailers to advertise without respect to the MAP price, If the MAP price is not going to apply at certain times. That's an important item to include. Other issues might be whether bundled products are subject to the MAP policy, or specifically, of course, which products or subject to the MAP policy and whether it applies to storewide sales versus particular sales. So, if a store is going to have a friends and family sale, 20% off your entire purchase, is your product, subject to that 20% off or is that a violation of the MAP policy?

There is a minimum advertised price policy checklist that is available to you on the MAP Trap website and you can get more information there.

Ron: Well, that wraps it up for today. We've run out of time. Jeremy, as always, I appreciate your expertise and your knowledge, and I know it will go a long way in helping brands to protect their products.

Jeremy: Absolutely my pleasure. Thanks so much, Ron.

Ron: Okay, bye-bye. If you'd like to submit a question or topic for a Legal Briefs podcast email them to legalbriefs@mapptrap.com, For more information about how MAPP Trap can help you with your online brand protection needs, visit www.mapptrap.com.