August 10, 2017

Protecting Your Product and Brand through Minimum Advertised Price Policies

Holland & Knight Regulatory Litigation Blog
Martin G. Durkin | David C. Kully

On Aug. 7, 2017, the Wall Street Journal reported that a growing number of brands are pushing back on the growth of large online retailers by adopting and enforcing Minimum Advertised Price (MAP) policies, among other strategies. MAP policies are programs under which manufacturers require that retailers not advertise or publicly offer to sell a product below a price set by the manufacturer. This price can be a Manufacturer’s Suggested Retail Price (MSRP) or some discounted level.  Manufacturers typically extend advertising support, sales or product training, or access to new or "hot" products to sellers who comply with these programs. Manufacturers often withhold those benefits from retailers who do not comply with MAP policies – and can even unilaterally terminate sales to noncompliant retailers.

MAP policies are used by manufacturers to enhance and protect their brand. Effective MAP policies can improve a manufacturer’s control of the quality and level of service retailers provide, and enhance the perceived value of the product. When properly drafted, implemented, and enforced, a MAP policy can incentivize a retailer to increase knowledge of the manufacturer’s products and improve its customer service, ensuring that resellers compete on customer service, and not on price alone.  This provides a strong and consistent message of the value of the product and the brand.

MAP policies also protect a manufacturer’s distribution channels, by curtailing "showrooming" of brick and mortar stores due to excessive discounting by internet retailers who take a free ride on the customer service of other retailers and provide little or no customer service or product support of their own. The MAP policy conveys to retailers that the manufacturer understands and values the service they provide to customers, and can strengthen the manufacturer – retailer relationship.

It is important that manufacturers tailor MAP policies to their goals and distribution channels. MAP policies can be standardized, but they are rarely "one size fits all." Manufacturers need to consider their competitive position in the overall marketplace, their relationship with retailers, and the presence of unauthorized resellers.  All of these factors can impact the likelihood of compliance with a MAP program.

Once implemented, manufacturers need to be diligent and consistent in their enforcement of the MAP policy, and willing – and able -  to terminate retailers who repeatedly refuse to comply. If the marketplace perceives that a manufacturer does not penalize violators of the policy, few retailers will see the need to comply, and the value of the policy will be lost.  Swift and uniform enforcement of the policy, including terminating or suspending retailers who violate it, will send a strong message to the marketplace that the manufacturer values its brand and its retail channel. 

Holland & Knight is experienced in the preparation and enforcement of MAP policies. We welcome the opportunity to discuss with you how we can assist you in protecting your brand and your products through this and other means.

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