In the words of the 1890 Sherman Antitrust Act, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations,” is considered illegal.
This is why careful creation of your MAP policy is critical. MAP policies (minimum advertised price policies) put a restriction on the minimum price that a service or product can be advertised as to its customers. There’s not necessarily a restriction on the actual price at which the product sells. Retailers can decide to sell the product at a lower price point, as long as they don’t advertise the product that way. MAP is an agreement made between the manufacturer and the retailer, not an agreement made between competitors. A manufacturer can decide on the price they want their product advertised to be and only deal to retailers who agree to their MAP pricing policy.
Now, this doesn’t mean that MAP policies are illegal. It’s perfectly in your rights to establish a guideline to set the prices at which your retailers will advertise and sell your products. It just means that if you aren’t paying close attention when drafting your MAP policy, you could accidentally get stuck in a sticky legal situation, even if you meant no harm.
How do you ensure your MAP policy is on the right side of the law?
Here are a few rules of thumb to protect yourself against the scrutiny of antitrust regulators:
1. Don’t be lazy. Create your own MAP template for your company. Grabbing a MAP policy off the Internet is the most common mistake manufactures and brand owners run into. You could accidentally pick an MRP template instead of a MAP policy or choose a template with legal language that’s inappropriate for your company’s situation. The policy you pull off the Internet could just be downright illegal, especially if it’s not within your company’s line of work. To write a strong MAP policy you must understand both legal and business nuances in the attempt to influence how your resellers will advertise your products. It’s recommended you work with brand protection experts and/or an antitrust council when creating your resale policy.
2. Don’t be inconsistent in enforcing your MAP Policy. The rules need to apply to everyone. This is the easiest trap for a brand to fall into. Granting favorable treatment to one retailer over another by letting a violation “slide” in order to keep a reseller happy could be looked at as price fixing to antitrust regulators, even if your intention is innocent.
3. Avoid referring to the word “pricing” in any form of communication, especially written communication. When communicating with retailers who have violated your MAP policy, don’t describe their infraction as a “pricing” error. Using the word “pricing” makes it seem as though you’ve established a pricing agreement between your company and your retailer. Use verbiage to describe such violations as “brand guidelines” or “violation of retailer policy guidelines”. This won’t set off any red flags to antitrust regulators and makes them view the situation in a more positive light. The term “brand guidelines” refers to the offense against your MAP policy, rather than how they priced the product.
4. Don’t consult with the resale channel while developing your MAP policy. This could be seen as “conspiracy in restraint of trade”, which is illegal. Simply talking with your biggest retailers about where or how you should set your pricing policies before the policy has been officially drafted, can violate the antitrust act.
5. Use a unilateral statement rather than having the reseller sign a two-way agreement. The Colgate Ruling states that the manufacturer and retailer must be independent actors and be free to make their own decisions regarding pricing. MAP has more freedom than MRP with this because MAP is the advertised price, not the final sale. However, to avoid any risk, compose a unilateral statement to keep you safe from antitrust scrutiny.
When crafted correctly, MAP policies do not violate antitrust laws. They help promote competition among resellers while giving the manufacturer more control of their brand and who is selling them. Retailers can still technically sell the manufacturer’s product at a lower price point. It just can’t be advertised as such. Installing a MAP policy will protect your brand value online and benefit the customer. MAP policies help shoppers locate authentic retailers while encouraging competition and exceptional customer experiences that “wow” the customer in areas other than price, such as delivery speed and service. Good MAP policies strengthen the manufacturer-retailer relationship while preventing price wars and protecting margins. Minimum advertised pricing ensures that resellers who are in competition with each other won’t slash prices and create a domino effect where everyone loses. It’s just a matter of drafting and rolling out your MAP policy so that it steers clear of the antitrust act’s murky waters.