Minimum Advertised Price (MAP) is a term growing ever more common among the eCommerce selling (and buying) community. It sounds so simple, and yet, as you might be aware, there is so much behind this concept.
“Where does an ‘advertised price’ stop?” “When does it turn into… ‘the price?’” “Wait—wWhat is an advertised price?” These are questions we get often from brands as they begin exploring how to implement online brand protection.
Well, we have good news and bad news. Let’s start with the bad news first: it depends. Ultimately, the facts of each scenario are unique, and, particularly with this developing area of law being relatively new, it is always best to consult your attorney with the specifics of your situation.
Now the good news: There are some helpful guidelines that can inform your MAP policy and your overall approach to pricing enforcement as you communicate with your approved resellers.
What is Minimum Advertised Price?
As defined by the New York City Consumer Affairs Bureaus (NYCCAB), an advertised price is “the price of a stock keeping unit [SKU] which a retail store has caused to be disseminated by means of promotional methods such as an in-store sign, or newspaper, circular, television or radio advertising.” Although quite concise, there really is a good amount to unpack within this definition.
Let’s take this definition at face value and do the unpacking in the following sections.
Where does an advertised price ‘start’?
Examining the definition above, the key term for our purposes of classifying prices is “disseminated.” According to the Oxford dictionary, to disseminate something means to ‘spread it widely;’ therefore, logically it follows that any pricing information a reseller causes to be spread widely would qualify as ‘advertised.’ With this context, the examples provided in the NYCCAB definition make sense: Newspapers, television ads, radio ads, etc.
But some methods aren’t quite so clear. What about the weekly flyer at the front of the store? What about an announcement over the PA system? What about the price tag itself?
Where does an advertised price ‘stop’?
Another way of asking this question is “when does a price—whether advertised or otherwise—become ‘the actual price of the item’ and not subject to a MAP policy?” While Blue Wheel's price and reseller visibility and enforcement partner, TrackStreet, leans on antitrust law in answering the question by differentiating publicly visible price information (advertised pricing) from “[p]ricing that results from private, direct communication with customers,” I think the best way to narrow in on this answer is to walk through several examples and watch the guiderails form:
- In-store Flyer: These flyers or weeklies are made with the express purpose of being (you guessed it) disseminated. Flyers that are printed in mass with goal of being in the hands of as many people as possible would mostly likely be considered a print advertisement with any prices listed inside being advertised prices and subject to MAP. I wouldn’t want to have to try and argue otherwise.
- Markdowns: These can get a bit dicey as there are obviously many different forms these can take, but lets look at a couple common forms:
- Storewide Markdown – If there is absolutely no signage advertising this markdown and it is solely represented on each shelf or each individual price tag, it would not be an advertisement and would not subject to a MAP policy. That said, this is rarely the case. If the store has signage up (for example, in the front window, when you walk in, posted in bright colors throughout the store, etc.), this scenario would constitute an advertisement and the prices within this markdown would be subject to a MAP policy.
- Rack-by-Rack or Departmental Markdown – This one is a bit more complicated. It would be broken down on a case-by-case basis, but the explanation above still applies: If there is widespread signage showing the markdown and it’s clear the store is trying to tell as many people as possible about the markdown, it would still qualify as an advertised price subject to a MAP policy. In contrast, if there is no flyer, no signage beyond the single rack or shelf, etc., the markdown would simply b ‘the price’ and not subject to a MAP policy.
- PA Announcements: This is pretty relatively cut-and-dry. Blasting an announcement to the entire store—especially repeatedly—is basically a radio announcement mixed with an in-store flyer. The clear intent is to (here it is again) disseminate that information to as many people as possible. These prices would be subject to MAP.
- Price Tags and Product Shelves: Okay, rest easy retailers. Simply putting the price for a product on the shelf on which it sits or on the hang tag of that item is in no way an advertisement. That price is simply the price. This is clearly the price at which the item is being sold and is on the shelf or tag to be informative as opposed to promotional. The goal is not to spread this price widely; it is simply to provide the consumer with the price. These prices would not be subject to MAP policies.
- Online Shopping Cart: Good question. I have seen well respected authorities in the online brand protection realm go in completely opposite directions on this one. TrackStreet has an article explaining their belief that the law allows MAP policies to reach into consumers’ online shopping carts and address those prices. At the same time, I’ve read other articles stating that the Federal Trade Commission (FTC) considers in-cart prices outside the realm of advertising and, therefore, not subject to MAP policies. With an issue as foggy as this, brands should feel comfortable installing the provisions they see as necessary to protect their interests and addressing any challenges to those provisions should they arise down the road. It’s fair to say one could reasonably argue both sides of the online-shopping-cart-price debate.
- Online Ads: We saved the easiest one for last. Online ads, whether banners, Sponsored Product Ads on Amazon, email blasts, or otherwise, are unquestionably advertisements and the prices displayed in such ads are subject to MAP policies.
Understanding MAP pricing policy?
Brands often resort to implementing Minimum Advertised Price (MAP) policies as a strategic approach to retain control over how their products are advertised or sold. Essentially, a MAP policy delineates the lowest price at which retailers are permitted to advertise a product. It doesn't necessarily dictate the actual selling price, but rather establishes a threshold to prevent retailers from promoting products below the specified minimum.
A MAP pricing policy functions as a contractual agreement between a manufacturer or brand and its retailers. This agreement explicitly outlines the minimum price at which a retailer can advertise a product for sale. By imposing this framework, brands aim to curtail price erosion, safeguard the perceived value of their products, and exert a degree of control over the competitive dynamics among retailers.
Importance of MAP policy for brands
The significance of MAP policies for brands resonates across various facets:
- Brand Image and Value: Enforcing consistent pricing across retailers plays a pivotal role in preserving the perceived value and integrity of a brand's products. Customers often associate a certain level of quality and value with specific price points, and consistent pricing helps sustain this brand image.
- Fair Competition: By setting a minimum advertised price, brands facilitate fair competition among retailers. This strategy prevents the occurrence of a price war that might otherwise adversely impact retailers' profit margins and potentially tarnish the brand's reputation.
- Channel Management: MAP policies assist in effectively managing diverse sales channels, thereby preventing conflicts between online and brick-and-mortar retailers by ensuring a harmonized pricing structure.
Are MAP policies legal?
MAP policies, in general, are considered legal in most jurisdictions, as they predominantly represent a mutual agreement between the brand and its retailers. However, it's imperative for brands to navigate certain legal considerations to avoid potential antitrust violations or allegations of price-fixing. Brands must ensure that the implementation and enforcement of MAP policies adhere to competition laws and regulations.
Benefits of MAP policies for brands
The implementation of a MAP policy offers an array of advantages for brands:
- Preservation of Brand Equity: Consistently maintaining pricing standards across various retail platforms aids in upholding a premium brand image.
- Retailer Relationships: A MAP policy fosters stronger relationships with retailers by establishing a level playing field for all, thereby reducing friction and fostering cooperation.
- Consumer Perception: Uniform pricing creates a consistent perception of value and quality among consumers, strengthening brand loyalty and trust.
What’s the difference between MAP and MSRP?
Differentiating between MAP and Manufacturer's Suggested Retail Price (MSRP) is essential. While MAP denotes the minimum price at which a retailer can advertise a product, MSRP represents the price suggested by the manufacturer but does not legally bind retailers to adhere to it. Essentially, MAP policies provide more stringent guidelines compared to the suggestions implied by MSRP.
Creating an effective MAP policy for your brand
To establish an effective MAP policy, consider these steps:
- Clear Guidelines: Define unambiguous rules, penalties for violations, and comprehensive communication strategies concerning the policy.
- Enforcement: Implement robust monitoring mechanisms to ensure compliance and take appropriate actions against violators, thus fortifying the integrity of the policy.
- Flexibility: Allow for occasional promotions or exceptions while upholding the overarching integrity and objectives of the policy.
MAP monitoring involves the ongoing and systematic tracking of adherence to the MAP policy across diverse retailers. This encompasses utilizing automated tools or services to vigilantly monitor online and offline advertisements, ensuring strict adherence to the stipulated pricing standards.
In essence, a meticulously designed and effectively implemented MAP policy stands as a cornerstone for brands, fostering pricing consistency, preserving brand value, nurturing retailer relationships, and ensuring compliance with legal regulations. The success of such policies hinges on astute execution, consistent monitoring, and adaptable yet resolute enforcement strategies.
If you have questions about your brand’s MAP policy and how it may be drafted or improved, feel free to reach out to our brand protection team.