It has recently come to light that several prominent brands have been violating federal law by charging less than the minimum price for their products. While this may seem like a minor infraction, it can significantly impact businesses and consumers.
This post will look at minimum advertising pricing and explain why these violations are an issue. We’ll also explore some possible solutions to this problem. Stay tuned!
What is MAP Policy?
Minimum Advertising Pricing (MAP) is a pricing strategy employed by manufacturers or authorized distributors to protect the brand’s image and control its products’ distribution.
Under a MAP policy, manufacturers or authorized distributors set a minimum price below which retailers are not allowed to advertise, display, sell, or offer for sale the manufacturer’s products.
The rationale for using MAP is that it helps to ensure that products are sold at a consistent price across all retail channels and protects both the manufacturer’s and the retailer’s interests.
From the retailer’s perspective, using MAP can help to reduce inventory management costs and avoid disruptive promotional activities from competing retailers. And from the manufacturer’s perspective, using MAP can help preserve its brand image by ensuring that its products are not sold below the manufacturer’s suggested price.
Sales of goods at prices lower than listed under a MAP policy are considered illegal “below cost” sales, or what is commonly called “dumping.” MAP policies are designed to be an alternative to government regulation of prices in international trade.
Manufacturers can also use MAP to establish minimum resale price maintenance (RPM) guidelines for wholesalers and distributors. RPM is allowed under the Robinson-Patman Act, but it must meet strict legal requirements, making it difficult for retailers to enforce successfully.
So while there are differences between the two strategies, both involve setting limits on how much resellers can discount from the list price. Historically, patent/copyright law supported this approach because it prevented resellers from free-riding on the manufacturer’s research and development.
In contrast, RPM violates antitrust laws when used by a dominant market player to stifle competition in a particular product area.
Who is Affected by the MAP Policy?
The Minimum Advertising Pricing Policy (MAP) affects brands and retailers who sell products online. The policy prohibits sellers from offering products for sale below a minimum price set by the brand.
The goal of MAP is to protect brand owners from having their products discounted below a certain price point, which can devalue the brand and reduce profits. The policy also helps ensure that retailers don’t undercut prices, leading to chaos in the marketplace.
At this time, the MAP policy applies only to products sold online, not in physical stores. However, some brands have begun extending the MAP policy to their brick-and-mortar locations.
What Does it Mean to Break the MAP Policy?
Violating the Minimum Advertising Pricing (MAP) policy is when a seller advertises, displays, or offers for sale any product through any channel of distribution at a price lower than the MAP-advertised price set by the manufacturer or authorized distributor.
Sellers that violate this policy risk receiving a notification from network marketplaces that includes:
- A requirement to adjust prices immediately on all affected products.
- Forfeiture of their selling privileges.
- The removal of negative customer feedback comments or positive feedback comments (positive testimonies will be removed if they were based solely on purchase price). It sounds like feedback extortion!
Avoiding MAP Policy Violations
How can you ensure that your prices comply with the Minimum Advertising Price policy? Follow these guidelines:
Regularly Checking Your Prices
You should frequently check prices on network marketplaces, which includes searching the platform for competitive sellers and checking to ensure there aren’t any price deviations or other errors. This way, if another seller attempts to sell below the required minimum advertised price (MAP), you’ll be able to correct it before being notified by your network marketplaces.
It’s also a good idea to have multiple staff members dedicated to monitoring pricing changes across all online marketplaces where you’re selling products. That way, everyone knows what they’re looking for and how to spot it.
Always Be Transparent
Price transparency is an integral part of network marketplaces and must comply with the MAP policy. You should be ready to prove that your prices are at or above MAP when requested.
This proof can be in the form of a price sheet, ad copy showing pricing, screenshots, etc., which will help network marketplaces determine if you’re offering products for sale at lower than the allowed minimum advertised prices.
Create A Price-Matching Policy
To protect yourself from price fluctuations and violations of your products, it’s also a good idea to implement a price-matching policy within your business practices. Under this policy, if another retailer offers the same product for less than you do (and you’re not violating any other terms), then you’ll refund the difference.
Don’t Sell Products On Your Own That You’re Not Authorised To Sell
If you want to be sure that not only are you following MAP policy but that you aren’t violating any other terms or requirements in your contracts, then you should never sell products on your own that the brand owner/manufacturer doesn’t authorize.
Doing so will open both yourself and your business up to violations of agreements with brands, consequences from network marketplaces for selling counterfeit items, etc., which could result in account suspension, loss of fees/profits, fines, or penalties, so why risk it?
Overcoming Internal Factors That Contribute To MAP Violations
Along with these tips about ensuring proper pricing, there are some internal factors that you should analyze if your business is experiencing repeated violations of network marketplaces’ Minimum Advertising Price policy. Areas to examine include:
- Your Pricing Strategy
- Your Inventory Turnover And Stock Management
- Product Life Cycle
- Number Of Stock Keeping Units (SKUs)
If you find areas for improvement in any of these areas, make the necessary changes and monitor carefully concerning pricing. When making pricing decisions, be realistic about how your products perform on all network marketplaces you are selling.
For example, it doesn’t make sense to sell a product at a loss on one of the marketplaces you are selling when it’s selling well at a full price elsewhere. Also, consider things like shipping costs into your pricing decisions, and factor them out accordingly. For example, one marketplace listing costs may be higher than selling on your own website.
When it comes to network marketplaces’ MAP policy, the only way to ensure compliance is by constantly monitoring prices across all online marketplaces where you’re selling products.
By frequently checking for price deviations or other errors, you’ll be able to correct any discrepancies before being notified by network marketplaces about a possible violation.
To protect yourself from fluctuating prices and violations from other sellers, consider implementing a price-matching policy within your business practices, giving you peace of mind that even if another seller does violate MAP pricing requirements, you won’t have anything to worry about.
Furthermore, make sure that you steer clear from selling products that the brand owner/manufacturer does not authorize because doing so will open both yourself and your business up to widespread consequences. By analyzing your internal factors, you’ll be able to keep prices in line with MAP policy guidelines without having to go through much trouble.
Conclusion
Minimum advertised pricing (MAP) is a policy that many businesses adopt to protect their brand and product. For MAP policy to be effective, it must be enforced consistently across all sales channels. Violating MAP policy can result in penalties, including loss of business and damage to the company’s reputation.
There are several ways to avoid violating MAP policy, including training employees on the guidelines, establishing procedures for requesting authorization to advertise below the minimum price, and using an advanced MAP violation tracking software to monitor prices. You can help ensure your business complies with MAP policy and avoid penalties by following these tips.
