How to Create a MAP Policy
In today’s fluctuating markets, more and more manufacturers face abuse involving their minimum advertised price policy. In a perfect world, minimum advertised pricing is a price floor, set by the manufacturer, that retailers will not advertise below. Unfortunately, as we know, it is common for retailers to undercut the competition to push sales.
While it may feel like a burden enforcing a MAP policy, the Federal Trade Commission says: “If a manufacturer, on its own, adopts a policy regarding a desired level of prices, the law allows the manufacturer to deal only with retailers who agree to that policy. A manufacturer may stop dealing with a retailer that does not follow its resale price policy. That is, a manufacturer can implement a dealer policy on a “take it or leave it” basis.”
Considerations before you Create a Minimum Advertised Price Policy Template
Your needs for effectively monitoring MAP are as follows:
1) A MAP policy: A policy put in place to impose restrictions on the price at which a product or service may be advertised, without restricting the actual sales price.
2) An automated tracking solution such as MAP Policy Partners: Even with your own dedicated team chipping away at MAP violators, there is no way to manually monitor all the items being sold and their prices in a finite amount of time.
3) Investigation services: An in-house investigation team brings unauthorized sellers out of the shadows. Without a team unmasking unauthorized sellers, it is impossible to follow up with the leads an automated report provides. At MAP Policy Partners, we have an in-house team of human researchers working around the clock.
4) Dedicated customer service and development: Because the landscape is constantly changing, you need a team you can contact at any time. We supply constant, open communication. Companies like Amazon, Google, and eBay are constantly evolving their “behind the scenes” development architecture. You need a company that has the experience and ability to adapt on the fly.
Do I Need a MAP Policy?
When looking at MAP policies, it is important to better understand their origin. Minimum advertised pricing resulted from two Supreme Court cases. In the United States v. Colgate, it is stated that a company has the power to choose who they do business with, and can revoke business based on price. Colgate put a MAP policy in place to handle vendors who sold below their MSRP. This policy was upheld in court. From this case, the Colgate Doctrine was born, which states that the individual action in the refusal to do business with another entity is acceptable unless it’s to create or protect a monopoly.
In Dr. Miles Medical Co. v John D. Park & Sons Co, minimum prices were made illegal, citing it as a violation of the Sherman Act. This ruling was overturned by the Supreme Court in 2007, stating minimum prices are not unlawful, per se, but must be judged under the “rule of reason.”
Looking at these two cases, we can conclude that a minimum advertised price policy is well within your legal right as a branded manufacturer. In addition to exercising your rights as a branded manufacturer, it is important your brand’s value is perceived uniformly across your entire reseller network. Enforcing pricing is one method available in keeping your brand strong across all seller channels.
With the rise of online giants like Amazon, Google Shopping, and eBay, the market has changed dramatically, becoming more and more saturated. Because the entire market landscape is available at a click of a button, price transparency is at an all-time high. Consumers know how to find the lowest price fast and quickly, and that means retailers will slash prices to remain competitive.
Considering Brand Value when Creating a MAP Policy.
You should continuously consider your brand’s value when drafting a new minimum advertised price policy template. Ask yourself, is there any gap between the way you view your brand and the way customers perceive your brand? Are you a valued brand? Can you become a premium brand? How much can you get for your product? Do not undersell your brand, reach for a premium status so that you can earn more money, and build a stronger value.
Price is highly correlated with a brand’s value. Once a reseller triggers the domino effect of cutting your price dramatically across a platform, it dilutes your brand’s value. In turn, this conditions the shopper to expect lower prices from that brand. Once the brand’s image is tarnished, it becomes increasingly difficult to sell that brand at a higher price again.
The average profit margin of a manufacturer is between 25-35%, use this as a benchmark when selling to retailers. Put your cost of goods into consideration, monitor competitor’s pricing, and consider how your reseller network is branded. Your brand value should be the center of the decision-making process when building out your MAP policy.
What Goes Inside my Minimum Advertised Price Policy Template?
• A brief description of your company to lay the groundwork as to why your brand should be valued at a price.
• Connect on some level before hitting them with a lot of legal jargon and threatening accusations.
• Compile a list of items and their MAP prices on your website. Give the retailers an opportunity to constantly view your current MAP policies (susceptible to price changes). A reference point is a great way to hold accountability.
• Clearly, define repercussions and clarify the channels that are applicable. A good example is “add to cart pricing.” Outline of a Standard MAP Policy
• Policy Statement
• Description of Company
• Purpose of MAP policy
• Price List • General Guidelines
• Common Questions/FAQ
• Advertising Guidelines
What Should Accompany my New MAP Policy?
An Automated Tracking Solution: An automated tracking solution: Even with your own dedicated team chipping away at MAP violators, there is no way to manually monitor all the items being sold and their prices in a finite amount of time.
Investigation Services: An in-house investigation team brings unauthorized sellers out of the shadows. Without a team unmasking unauthorized sellers, it is impossible to follow up with the leads an automated report provides.
Scanning Several Times a Day: By providing you four scans a day you will be consistently informed on rapid changes in the marketplace. Online giant marketplaces such as Amazon are among the most competitive for online retailers. It is impossible to effectively monitor MAP pricing manually 100% of the time.
Violation Data and Screenshots: You will need to know the total number of retailers violating MAP at any giving time, and who they are. How much are they violating by? Which resellers are violating the most – so that you may target top offenders? How many products are in violation? Providing screenshot evidence of violations will keep sellers accountable and useful for legal purposes.
Dedicated customer service and development: We supply constant, open communication. Companies like Amazon, Google, and eBay are constantly evolving their “behind the scenes” development architecture. You need a company that has the experience and ability to adapt on the fly.
Finding the right approach to MAP is very challenging, as there are many moving pieces to the puzzle. We hope this guide serves as a useful set of tips when crafting your policy. While this is a great place to start, we recommend working with an attorney when drafting a new minimum advertised price policy template for the first time. This guide will serve as one of many tools in keeping your brand protected across multiple channels.