MAP Policy Basics
It is a minimum advertised price policy. MAP Policies are unilateral policies implemented by manufacturers, which set forth the minimum price at which a reseller can advertise your product. MAP Policies are used to ensure that one reseller cannot undercut other resellers, which in turn protects your brand and increases competition among your resellers.
A MAP Policy does not establish the price at which resellers can actually sell your product. Resellers are free to sell a product at whatever price they choose. A policy which restricts the sale price risks exposure to price-fixing allegations.
When implemented and enforced correctly, courts have found that MAP Policies are generally legal and do not constitute illegal price fixing. In Leegin Creative Leather Prods. v. PSKS, Inc., the Supreme Court ruled that vertical price restraints, such as MAP Policies, are not per se illegal, and in United States v. Colgate & Co., the Supreme Court held that a manufacturer may announce certain sales practices and refuse to deal with resellers that do not abide by such practices. Taken together, these cases have helped to establish MAP Policies’ legality.
Creating a MAP Policy
Your MAP Policy should state that the MAP Policy is a unilateral policy, and that it only applies to advertised prices. The MAP Policy needs to identify the products that are covered by the policy and their corresponding minimum advertised price. Your MAP Policy should clearly state what is and what is not a violation of the policy, and it should be written in easy to understand language.
In order to avoid any price fixing allegations, MAP Policies should be unilateral. This means that when you implement your MAP Policy, it is just that - a policy - it is not an agreement between you and the reseller. In fact, it is generally advisable for your MAP Policy to include an express statement that the reseller does not have to sign or execute the policy. However, you, as a manufacturer, retain every right to refuse to do business with or sell to those resellers that do not comply with the MAP Policy.
This may seem obvious, and for the most part the advertised price is easy to identify. It is the price consumers see when they go onto a reseller’s webpage or storefront. The issue gets more complicated with things like “click for price” buttons, email bounce-backs, and coupons or rebates. As a rule of thumb, any time a price is shown prior to the product being placed “in-cart,” it is considered advertising and the price shown must comply with the MAP Policy. However, a price that is only displayed “in-cart” is outside the scope of a MAP Policy. Other issues like product bundling also create confusion as to what constitutes the advertised price. These complications however can be avoided with a clearly worded and easy to understand MAP Policy.
Enforcing Your MAP Policy
Evenly and consistently. You should enforce your MAP Policy evenly among all your resellers. Avoid aggressively enforcing your MAP Policy against certain smaller resellers, while giving larger resellers a pass. Similarly, it is important to regularly and consistently enforce your MAP Policy. Your MAP Policy is only effective if you monitor your resellers’ activities and take enforcement action when a violation occurs. MAP Policy enforcement must become an integral part of your resale strategy; otherwise, resellers will violate your MAP Policy rendering it ineffective.
It depends. In the event of a MAP Policy violation, the best practice is to immediately cease selling products to that reseller and notify the reseller that your business relationship is over. Such a strict policy, however, may not be realistic in practice. Instead, your MAP Policy could have varying levels of repercussions for MAP Policy violations. For example, you could issue a warning for the first violation, suspend the reseller’s account after the second violation, and terminate the relationship after the third violation. No matter how you decide to enforce your MAP Policy, it is critical that you clearly lay out your enforcement procedures in your MAP Policy and that you strictly enforce those procedures among all violators.
The key takeaways when creating a MAP Policy are that the policy needs to be easily understood, it needs to be unilateral, and it needs to be evenly enforced across all resellers. But, remember, these are merely guidelines. Your business is unique, and your MAP Policy should be specifically tailored to your company. You should consider hiring counsel to ensure that your MAP Policy is not only legal, but makes sense for the goals of your company.