Legal Briefs #4 - Selective MAPP Enforcement

Transcript:

Ron: Hello, and welcome to another edition of MAPP Trap’s Legal Briefs. We're here with Jeremy Richardson. This topic will be on Selective MAP enforcement. So, Jeremy, most brands that we work with are under the impression that with a minimum advertised price policy you need to treat all of the sellers equally, and that you need to enforce the policy equally. Meaning that when it comes to enforcement, you have to cut off Amazon, just as you would with any smaller seller that's only buying a very little bit of your product. Is that always true?

Jeremy: Hi, Ron. Thanks. Good to be back. The answer to that is, no, you do not have to uniformly apply your MAP Policy and enforce it across the board equally to all retailers of all sizes.

Now let me take a step back here and say I'm providing the law according to Jeremy. Everybody should make sure that they talk with attorneys in their localities and investigate this particular issue. But I say the answer is no, at least from a legal perspective. Now, I still recommend to all of my clients that they do enforce their MAP policy as evenly as possible, but let's think about this for a moment.

It's really unusual to have the exact same issue arise across multiple retailers or even two retailers. Violations can be different, so it's hard to really say that you're going to enforce it equally in all situations, because all situations are often different. Under the law, at least according to Jeremy and in the state where I am, in New York, courts will apply what's called the Business Judgement Rule.

That means that the court will not impose its own opinion of how a business should run itself. It will defer to the business. This allows the business to decide what's in the business's best interest, and in some cases, it will make sense to enforce the policy differently to different retailers. There may be good business reasons for allowing one retailer to have a slight variation of enforcement as opposed to others.

Still, I think that it is wise, as much as possible, for brand owners to enforce their MAP policies evenly because creative attorneys will find creative ways to bring actions against companies that don't enforce MAP policies evenly. What do I mean by that? Well, there are many statutes across the country called Unfair Business Acts or unfair business practice statutes, and I could easily see a retailer's lawyer coming up with a theory under an Unfair Business Practice Act statute to say that uneven enforcement of the MAP policy is a violation.

So again, the answer, at least according to Jeremy from a legal perspective, is no, but I still recommend to my clients that they do the best they can to enforce the policy evenly across the board.

Ron: In order to cover itself, would you recommend that a brand put something like that in their policy?

Jeremy: In some cases, the best thing to do is not to have specific enforcement measures listed out in your MAP policy, because that gives the company the greatest flexibility to address each situation uniquely, based on those circumstances. I have seen policies which have a very specific and regimented enforcement plan. On the first violation, you'll get a letter. On the second violation, you'll be suspended for six months. On the 3rd violation, you will be cut off forever. I just don't think that's a good idea because again, there may and likely will be situations where you don't want to enforce the policy precisely as it's set out in your MAP policy. So, for more flexibility I would just say that the company reserves the right to enforce its MAP policy as it sees fit under the particular circumstances of each situation.

Ron: What about this term that that we've heard called Rebuttable Presumption. That if you're going to not enforce uniformly, that can indicate maybe the brand is making special deals with certain sellers. That's not allowable legally, right?

Jeremy: So, a rebuttal presumption is a situation where a party has a burden of proof. And there's a rebuttable presumption in that the proof is presumed. But it is rebuttable by the other side. So, if I have to demonstrate a violation of some particular rule, but it's presumed that the violation exists, the other side has to say, well, you didn't actually violate the policy or they didn't actually violate the policy. So that's the rebuttable presumption, shifting the burden from one side to the other.

Ron: OK, so that shouldn't be a concern for a brand, as long as they're not making some backroom deal, of course.

Jeremy: Yeah, I don't think that the rebuttable presumption theory or the rebuttable presumption doctrine will be an issue here. We would have to look again on a state-by-state basis and understand what the burden of proof is for each side and then consider how a company is going to have to demonstrate a violation if it even comes to a courtroom situation, which likely it wouldn't.

Ron: OK, so one more question on this that comes to mind is, what happens to the brand, so you know they're allowed, you're saying to cut off Amazon, or to cut off a smaller guy and not Amazon. But then that smaller seller sees that Amazon is still online, still selling the product, still violating the MAP, and they're sitting on the sidelines having been cut off and feeling pretty persecuted. And so, they call up the brand and they say, well, wait a minute, why me? Right? How can you cut me off and not Amazon? What should the brand say? Or should they say anything to explain this?

Jeremy: So, let's start with who the retailer is calling. Every MAP policy should have a statement in it that nobody at the company, with one exception, and that's the person responsible for dealing with MAP communications. Nobody else at the company is going to address substantively calls from retailers about the MAP policy and MAP violations, so that goes on to whoever the MAP policy person is. And I would say that person, depending upon the circumstances, but generally speaking, that person should not give any sort of substantive response other than to say the company has found that you violated the MAP policy and has decided to act under its minimum advertised price policy, unilateral policy, to stop selling to your company. And I wouldn't get into any discussion about, “well, you will have this other retailer to sell in light of a violation. But you stopped me. Why is that.” I wouldn't get into that conversation. It is just fodder for litigation, and it's generally not a good idea, I think.

Ron: OK, sounds good. Well, with the biz judgment rule here, it sounds like we can enforce not uniformly, but your recommendation is that they do not do that, right?

Jeremy: Yes. Again, my recommendation is that, to the best of the company's ability, they do enforce their MAP policy uniformly. If there's a similar or identical violation by two different retailers, those two retailers should be treated the same under the MAP policy because it does raise questions. And again, a retailer's lawyer may find a statute an Unfair Business Practice Act statute that could in theory, give rise to a claim. And you don't want to be the one who has to be the test case and defend that and spend a lot of legal fees to reach a resolution of that situation. Better to just, as best you can, enforce your MAP Policy evenly.

Ron: Well, thank you, Jeremy. This has been enlightening and we'll talk to you again another time with another Legal Brief.

Jeremy: Sounds good. Thanks, Ron.

Ron: And I hope you have a great day. 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.