Many manufacturers today are turning to minimum advertised pricing (MAP) policies to help safeguard their brands online. In short, MAP policies in the internet context are polices that manufacturers adopt through which they declare the minimum prices at which their authorized sellers should list the manufacturers’ products for sale online.
Although a manufacturer’s MAP policy is unilateral and does not actually restrict the prices at which the authorized sellers can sell its products, “MAP pricing” is nonetheless very important. Specifically, establishing MAP pricing and setting the threshold price for authorized sellers to (ideally) adhere to from an advertising standpoint can benefit manufacturers and their brands in a number of ways.
For example, establishing a MAP policy and enforcing its MAP pricing could result in the following for a manufacturer:
- price coordination among authorized sellers;
- better control of margins;
- avoiding downward pressure on pricing from large retailers;
- decreasing “showrooming”; and
- keeping authorized sellers happy.
Establishing MAP pricing is just half of the battle; to achieve any of the above requires that manufacturers put in time, effort and money to actually enforce their MAP policies. While studies have shown that unauthorized sellers are more than three times as likely to violate MAP policies as authorized sellers, it is still critical that manufacturers ensure that authorized sellers—parties with whom manufacturers have contracted with to help sell their products in a controlled and consistent manner—are respecting their MAP pricing.
If manufacturers allocate significant resources to control distribution, including developing MAP policies, it is important that they do not lose control over their brands – something that often occurs beyond the first level of distribution. This is because authorized distributors (with which the manufacturers likely have agreements), generally sell the manufacturers’ products to resellers (with whom the manufacturers typically do not have agreements). Thus, under this model, it is difficult for manufacturers to control MAP pricing – not to mention they cannot ensure that the resellers are properly providing the manufacturer’s unique services, benefits and quality controls.
To help protect against MAP violators and avoid the headaches that come with violations of MAP pricing, manufacturers should consider implementing an “authorized reseller program.” The idea behind such a program is to not only sell to authorized distributors but also approve of the resellers who purchase from the distributors. While there is still no agreement to enforce MAP pricing, as MAP polices are unilateral, approving of resellers can still help manufacturers maintain MAP pricing while obligating the authorized resellers to follow other company policies and procedures by requiring them to sign authorized reseller agreements.
Adopting an authorized reseller program can help position manufacturers for success in terms of monitoring MAP pricing and enforcing their MAP policies. By requiring authorized resellers to identify, and get approval for, each website and screenname they intend to use for online sales, this allows manufacturers to triage MAP violations into authorized and unauthorized seller categories; this will dictate the type of enforcement actions the manufacturers should take. But ultimately, implementing an authorized reseller program allows manufacturers to maintain control over MAP enforcement instead of relying on their distributors; the former can be both impractical and increase antitrust risks.
In short, a lack of relative control over distribution will impair a manufacturer’s ability to effectively protect MAP pricing and limit unauthorized online sellers. Therefore, by limiting distribution online to trusted sellers, this can go a long way toward protecting brand value and integrity.
Best practices: authorized reseller programs
In our experience, an effective authorized reseller program should be based on each of the following:
- manufacturers exclusively sell to authorized distributions which sign an authorized distributor agreement or receive authorized distributor policies from the manufacturers;
- authorized distributors are only permitted to sell products to authorized resellers (i.e., individuals or entities with whom/which entered into authorized reseller agreements or to whom/which the authorized distributors have provided the manufacturers’ reseller policies – and MAP policies);
- authorized resellers must receive permission from the manufacturers to sell online and then only sell on manufacturer-approved websites;
- manufacturers can enforce their policies against authorized resellers who violate them (including violating MAP pricing);
- manufacturers can revoke an authorized reseller’s “approved” status and can place an offending reseller on their “do not sell list,” which they communicate to authorized distributors; and
- manufacturers can use trademark law to enforce against non-compliant resellers who/that continue to sell the manufacturers products.
Authorized reseller programs are just one piece of the much larger puzzle of protecting one’s MAP pricing and limiting unauthorized sales online. We recently published a lengthy white paper—“The Winning Strategy for MAP Success and Long-Term Brand Value in the E-Commerce Market”—in which we discuss the above as one component for maintaining long-term e-commerce success.
Download this white paper today to read more about the root of the overall problem; ineffective strategies for enforcing MAP policies and MAP pricing; developing a foundation for legal claims against unauthorized sellers; exceptions to the “First Sale Doctrine” defense; effective enforcement techniques to help stop unauthorized sales; and how to maintain a successful MAP program.
For more information, contact Whitney Gibson at email@example.com.