Mistakes to Avoid When Creating Your MAP Policy
MAP policies are an excellent tool for manufacturers. They allow you to defend your brand image and the price at which your products are sold, while also encouraging good, value-added retailers to work with you as they do not have to fear being undercut by cut-price sellers. However, MAP policies are far from foolproof. Manufacturers adopting them often make costly and dangerous mistakes. In this article, we discuss three pitfalls to look out for when adopting a MAP policy.
Cookie-cutter MAP policiesDid you know that you can just download a ready-made MAP policy? There is no shortage of samples and templates online. But just because you can, doesn’t mean that you should. As with suits, custom will always fit better than off-the-rack. Every business is unique, and so an effective MAP policy should take into account the market in which that business operates, the state of its retail partners, the strength of its brand and so on. In order to create a MAP policy you need to answer certain basic questions: what counts as an "advertised price"? Who counts as a retailer? Should the MAP be enforced at all times and in all places, or should retailers be allowed some flexibility, for example by allowing "MAP holidays" during peak season?
Using a pre-made MAP policy can, in the worst cases, expose your company to antitrust litigation, with potentially huge damages attached. Before adopting any MAP policy, have it looked over by an antitrust attorney.
Weak, inconsistent enforcementWriting a MAP policy without having an enforcement plan in place is an exercise in futility. Before enacting one, you need to consider the ways in which you can punish retailers that break it. Punishments need to be credible and reasonable. Cutting all ties with a retailer for a first violation might be tempting, but typically manufacturers begin with small punishments or even warnings before progressing to total bans. This often takes the form of temporary suspension, with longer suspensions for repeat violations. Some manufacturers also offer marketing assistance to partner retailers. This helps to create better relationships with retailers, while also giving the manufacturer a point of leverage when punishing MAP violations.
Your MAP policy must also be enforced consistently. Inconsistent enforcement of a policy allows some retailers to fall through the cracks, angering authorized retailers who played by the rules and find themselves undercut by less scrupulous rivals. It can also expose you and your company to antitrust suits: if you take action against a non-compliant retailer after hearing complaints from your other retailers, this can be seen as an agreement in restraint of trade by a court. The most effective way to ensure consistency is to automate the price monitoring process using an online service to ensure that no retailers slip through the cracks.
Negotiating with retailersAccording to the Federal Trade Commission, MAP policies are legal so long as they are imposed unilaterally by the manufacturer. Some states go even further with a total ban on vertical price agreements. This means that, when implementing a MAP policy, you cannot negotiate with retailers. Any back-and-forth before implementing the policy can potentially count, and even if it is eventually ruled innocuous by a court, fighting an antitrust suit is almost guaranteed to be expensive and time-consuming.
Negotiating with non-compliant retailers is even worse. As when creating the MAP policy in the first place, negotiating with non-compliant retailers can expose your company to antitrust suits. Even if you are able to negotiate a good solution with the retailer, if other retailers know that you can be bargained with, they will attempt to do so. Furthermore, once you start negotiating with retailers on a case-by-case basis, you end up with an inconsistently enforced MAP policy with different terms for different retailers. This is an antitrust minefield, and the safest way to navigate it is to avoid entering it in the first place.
While these three pitfalls are dangerous, they are also easy to avoid once you know that they exist. So long as you draw up a custom MAP policy with the aid of legal counsel and then enforce it consistently and without negotiation, it will protect your business rather than endangering it.back to blog