What is MAP monitoring and why is it important? Is it a type of price fixing? Who benefits from it, only brands or retailers or customers too? There are so many questions about it and in this post, we are going to explain them all.
What is MAP?
Minimum Advertised Price (MAP) is the lowest price set by a brand (or a manufacturer) that a reseller is allowed to advertise the product for. This doesn’t dictate the final price, only what they can show on the website, ads, etc. MAP gets mixed up with price fixing and MSRP, but it’s not the same. Price fixing is when competitors agree to sell or buy a product only for a fixed price, usually a higher one. It’s illegal because customers aren’t given a fair price which is based on supply and demand. They do it to reduce the rivalry between themselves. One more problem regarding the price fixing is that it’s very hard to determine if the price change was caused by price fixing or a grounded reason. On the other hand, Manufacturer’s Suggested Retail Price (MSRP) is a price that the manufacturers believe that the products should be sold for. It has nothing to do with lowering the competition. Manufacturers calculate the production costs and different margins, take the demand and supply into consideration and then decide on the price (each for themselves). That is the price the resellers should be selling for. So, retailers shouldn’t be advertising below MAP and selling under MSRP, but those prices don’t have to match.
Is MAP legal?
The answer to this question depends on the country and its laws. For example, in the USA and Canada, it’s legal. The agreement between the brand and its resellers isn’t looked upon as if it were price fixing. However, in the UK and Europe, it’s not allowed to do this. So a brand that is working with retailers across the globe has to be very careful where he can apply this policy.
Who benefits from the MAP?
Well, there are benefits for brands/manufacturers, retailers and customers. Basically, everybody.
Can retailers go around the MAP agreement?
Yes. As always, people find a way to go around something that they think is bad for them. If they agreed not to advertise under a certain price, that doesn’t mean that they aren’t selling for a lot lower. Retailers are promoting coupon codes, discounts for this and that, whatever they can to attract customers. The final price will be shown in the shopping cart and that cart doesn’t fall under the advertising space. So, technically they aren’t breaking the MAP agreement. But they could be breaking MSRP policy (if there is one).
How to know if retailers are violating the MAP agreement?
Brands and manufacturers can monitor their retailers using price monitoring tools, such as Price2Spy. Price2Spy is a price monitoring, comparison and repricing tool that is suitable for brands and manufacturers of all sizes and from all industries. Price2Spy has a mechanism to alert you when an online store violates the MAP. MAP violations can be monitored in various markets and various currencies. When they know who isn’t keeping their part of the agreement they can choose not to work with them or give them different terms of working together. Certain brands will stop working with retailers if they break the terms (e.g. GoPro).
Are there any risks to enforcing MAP policy?
Yes, there are. A brand may need to cut-off their largest retailers because they aren’t fulfilling their part of the agreement. It’s better to have a couple of smaller clients than one big that is lowering your brand value.
In the end, it’s up to the brand if it wants to enforce MAP policy or not, and up to what extent. They have to maintain their brand value and having a different price advertised by the different reseller isn’t helping. So, minimum advertised price helps them prevent this. But it also creates healthy competition among resellers and helps customers to get the best value for their money (with after-sales services, etc.)
Are you allowed to enforce MAP policy in your country? Let us know, we’d be happy to hear from you!