Legal Briefs #7 - MAP Policy Must-Haves

Transcript:

Ron: Thanks for joining Legal Briefs. I'm Ron Solomon, the CEO of MAPP Trap and, as always, I'm speaking with Jeremy Richardson, a partner and lead attorney in the firm's consumer products industry team at Freeborn & Peters. Welcome back, Jeremy.

Jeremy: Hi, Ron.

Ron: In today's podcast, Jeremy, we want to circle back to a conversation that is dedicated to MAP policies. MAP policy must haves. You've mentioned you have a list and we understand that there is no one-size-fits-all MAP policy because not every brand is the same. Penalties could be different. Some could include shipping in the total advertised prices, others not. Not some could include bundling, etcetera. But as you've mentioned there. Are certain terms that all of them should have so. Can you sort? Illuminate us on what those.

Jeremy: Yeah, Ron, thanks again for the opportunity to be here. Nice to be with you as always. Yeah, we have a minimum advertised price policy checklist, which we've shared with you and I think is available to your friends and listeners on your website. So, we'll run through several of those items on the checklist.

And the first one is, will the MAP policy apply to all items or only to specified items? Again, it's really important to make clear what the scope of the policy is to your resellers so they know what you expect from the MAP policy and what they need to do to comply should they choose to, with your MAP policy. And sometimes there may be really good reason for having all of your products subject to the MAP policy and other times they are good reasons not to. You may only want to have the MAP policy apply to your core line. Or just the opposite, you may want to have the MAP policy apply to items that are not necessarily part of the core, but important to your product brand. So that's really the first issue to address. What will the MAP policy apply to, which products?

The second item is what will the MAP price be? Will it be your manufacturer’s suggested retail price? Will be some discount off of the MSRP? How are you going to get to that? And one of the things that I actually find important is for brands that have their own websites and sell to consumers, and essentially act as a competitor to the resellers that are selling their product is, you too if you do that, should be complying with your MAP policy and advertising your products at prices that are consistent with the MAP policy. You want to promote an even playing field.

I've even seen one of my clients in the consumer product space that advertised all their products at the MSRP, but set the MAP price a little bit below MSRP. It actually gave the resellers an opportunity to advertise the products below what the brand was advertising the products on its own website. I I think that bought some goodwill with the retailers and, still, there were plenty of consumers that went to the brand’s own website and were willing to purchase products directly from the brand owner for whatever reason, even though those products were advertised a little bit higher than than the competing retailers.

Ron: Real quick on that one, not a lot of brands have an actual preset formula, unfortunately, and we try to, we try to convince them that they should have a consistent formula so that it's not confusing. Create a new product; you know what the MAP is going to be. Some of them are just catch as catch can, and they're going to say this is going to be X, this is going to be Y. So, they wouldn't necessarily be able to put that in the policy. So is attaching the price list with the MAP prices on it, would you say that that would cover that base?

Jeremy: No, I think it's a good idea to include the MAP price list. Certainly, when you roll out your MAP policy for the first time and keep in mind that those MAP prices may change over time, or you may launch new products that obviously were not subject to the MAP price list because they didn't exist. So, you want to have a mechanism to continually update your resellers on the MAP price list. That may be a password protected retailer portal on your website. It may be sending out an e-mail, but yes, I would. I would recommend to the greatest extent possible setting those prices, I recognize that there are certain unique situations where the product manufacturer really isn't able to come up with an MSRP or come up with a price that it would anticipate the products eventually would be sold at, so it's difficult to set the MAP price. But I do think setting an MSRP is a good idea even if retailers ultimately, choose to sell well below the MSRP. And I usually think that setting the MAP price based on MSRP is the easiest, most efficient way to determine that MAP price.

Ron: Yeah, I so didn't mean to get us off track on what are the MAP must haves, so let's jump back into that. And the last one you said was the pricing.

Jeremy: Yep. And the next one, related to what I just said is where will the MAP prices be listed for retailers to follow? We just actually covered that, you anticipated the issue and mentioned it. So, I think we've they hit that. And then I'll go on to a couple more points.

May a retailer advertise free shipping? So, shipping really is not part of the product price, it's not part of the MSRP, it's not part of the MAP price. So, is that something that a manufacturer should be concerned with? And again, the MAP policy is intended to create a level playing field for all retailers and some retailers may want to advertise free shipping and absorb that cost, others might not be able to. It's fair to include retail advertising as part of your MAP price and to say, well, if you're going to say free shipping, that would be a violation of the MAP price, you really, you can't do that because it going to uneven the playing field and we want to have an even playing field. So does the minimum advertised price policy apply to free shipping? That's a question you should consider.

The next item on the list is will the MAP policy apply to website features such as “click for price” and automated “bounce back” pricing emails? This really gets into how can a consumer on an e-commerce website know what the real sales price is, not the advertised price? And there are all sorts of mechanisms for doing this: “call for price” or “put into shopping cart to see the actual price.” I think those are good items to include in the policy to be able to essentially say that in order to see what the real selling price at retail is on an e-commerce website, the website visitor, the consumer has to take some affirmative action. Click for price, put in cart to price and that really distinguishes your advertised price from what the retail price is going to be. That really applies just to the ecom world, not to brick and mortar.

Another point to address is can a retailer advertise that it has the lowest prices or use language that suggests that its retail price is lower than the MAP price? Such as, our prices are so low that the manufacturer will not allow us to show them. Well, yeah, I think it's something to consider. Do you want to have your retailer be able to say that has the lowest prices, that it'll match the lowest prices, even if those end up being below your MAP price list? I think it's something you build into a MAP policy. But again, these are flexible policies, some manufacturers may want to have that, others may be perfectly fine not addressing that, but we want to be clear in the way we convey what our policy is, again, so that it's predictable so that the retailer knows what to expect.

Ron: What about terms like “unilateral” or to specify whether this applies to online only, or online and brick and mortar? Are those things that that need to be in, in the policies.

Jeremy: You certainly could have separate policies for brick and mortar and for e-commerce. I used to think of e-commerce as the platform that had the unfair advantage because it had lower overhead and could really compete on price. So, I always viewed the minimum advertised price policy as a way of appeasing the brick and mortar stores. But I've come to learn that there are actually situations where the ecom retailers are at a disadvantage. Again, we talked about this, if you're selling a 25-pound bag of sand, it's a lot less expensive for the brick and mortar to sell that to a consumer who drives up and picks up the product at the store as opposed to having to load that 25-pound bag of sand onto a UPS or FedEx or other shipping company’s truck and 25-pound pay for freight. So, there's an example where E-com has a disadvantage, and that's why, again, we get into, as I mentioned before, free shipping. Can you advertise that? Should that be included in the MAP policy. And so that's one of those areas where actually you might want to have a separate E-com minimum advertised price policy, as opposed to brick and mortar advertised price policy.

Ron: OK. So, that is that the list?

Jeremy: Well, there are a couple more. Let me hit one or two more. Just so we have a little more information for your listener. I, like to talk about MAP holidays a lot. What is a MAP holiday? Well, there may be certain occasions when your product has a higher, a higher level of sales than at other times during the calendar year. If you sell a product that is, oh, I don't know, let's say it's chocolates, and Valentine's Day is coming up. Yeah, you may want to allow your retailers to skirt the minimum advertised price policy in advance of Valentine's Day, because that's really when retailers have an opportunity to move a lot of products and they want to be able to compete on price and not be bound by the minimum advertised price. So, having a MAP holiday in the couple of weeks ahead of Valentine's Day, when you're selling chocolates, could be a great way to give retailers relief from the MAP policy to the extent that they might see it as a, as a burden, and lets them sell without concern with them advertised without concern about your minimum advertised price policy. So that's MAP holidays.

I did want to touch on one at least one more point, which is what should not be in a minimum advertised price policy. And we've talked about this before. It is a unilateral policy, it's not an agreement. So, what you don't want to have, is a signature line for the retailer to agree to your minimum advertised price policy, because that's when it shifts from a policy to an agreement, a bilateral agreement. And that's a no, no, we don't want to do that.

Ron: Another thing I think you mentioned before is been maybe not to have what the penalties will be. Not to be specific, but more general that we reserve the right to blah blah blah.

Jeremy: Yeah, Ron, that's actually a really great point. I have seen a lot of policies which lock a manufacturer into a fixed set of responses to a violation. On the first violation we're going to send you a warning letter, on the second violation, we're going to suspend your account for 30 days, on the 3rd violation, we're going to cut you off for six months, and if you ever come back and do it again, we're never going to sell to you again. I been don't like those rigid, formulaic, we must respond to all violations in this specific way, regardless of what the violation is. I really think it's much better to simply say that the company reserves the right to respond to a violation of its minimum advertised price policy as it sees fit. It gives them the greatest flexibility and the opportunity to really tailor their response to the specific situation.

Ron: Allow me to push back just a bit. I'm very much a keep it simple, stupid kind of guy. And one thing you didn't bring up was bundling. My guess is that that's just something that would be at the discretion of the brand, whether or not they wanted to include it. But just like you don't want to set in stone and be rigid as to what the penalties are, could it potentially get too complicated by saying you can't do this, you can't do that, you have to do this, you have to do that. You know in terms of you know “Click to get price,” “10% off,” it has to be calculated, it has to be an integer as opposed to the word TEN, you know, written out so that the bots can miss that. Is it really necessary to have all that stuff in? You're the lawyer, so you say yes, then it's yes.

Jeremy: Well, thanks for pushing back on that. I realize that I live in, in my law office and I'm not in the real world. Certainly, when it comes to many of these issues and, Ron, you make a fabulous point and it's very easy for me to say, hey, respond to each situation, on a case-by-case basis. Not so practical when you're moving millions and millions of units to hundreds if not thousands of different retailers, and do you really want to have an entire team to monitor and enforce your MAP policy?

So, I recognize there are going to be plenty of situations where it's so much more efficient to have a formulaic response. On a first violation you're going to get a notice letter, on the second violation, et cetera, and I think it is perfectly good to have that as an internal strategy. Maybe not spell it out in your MAP policy, but have that internally because it again, you're absolutely right, it just makes it so much easier to enforce your MAP policy and not to have to get stuck in minutia.

Ron: So, I think you you've got them all. I guess one, one last thing I have to ask you. Should it be specified in the policy who they should speak with? Is that a must have? To say that you've got to speak with you know, Jeremy, and nobody else in the company can speak with you about this MAP?

Jeremy: Another great point, Ron, I guess you've probably read my list a few more times than I have. Yes, you really should have one person who is appointed as the MAP policy communicator within the company. You don't want a whole host of folks, especially not your entire sales team, communicating with retailers on what the MAP policy is and how it's going to be enforced or responding to questions about specific enforcement. It should be one person, whether it's the owner of the company, depending upon the size, whether it's somebody in sales, the director of sales, somebody else. But yes, there should be one person and one person only who deals with all MAP policy inquiries from all retailers, and not have it as every salesperson dealing with their own customer list and responding. Because then it gets inconsistent or you might get inconsistent responses and you really want to have this as consistent as possible.

Ron: Definitely makes things easier for everybody with consistency. So, thank you for that. Any last word on this?

Jeremy: Again, I So, really like MAP policies. I think they go a long way to brand protection, integrity protection, to leveling the playing field, to really making it better for your retailers. I suppose the last thing I would say is it's really important to have internally your sales team, and really the entire team within the company, to understand and buy into the MAP policy before you roll it out to the retailers. So, communicate it well internally before you communicate it externally.

Ron: Well, thank you. The good stuff the MAP must-have lists and a couple of never-dos, and we appreciate it, Jeremy as always.

Jeremy: My pleasure. Thanks so much.

Ron: 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 MAP Trap can help you with your online brand protection needs, visit www.mapptrap.com.