What is Minimal Advertised Price (MAP) and why is it so important?
Minimal Advertised Price (MAP) represents the lowest price that a retailer is allowed to advertise the products for sale. In order to put things clear for the very beginning, it is important to point out that this rule doesn’t define the lowest price by which the product will be sold, but only advertised.
One of the main questions that arise are the following: Is MAP monitoring the same thing as Price-fixing? Is it legal? Who benefits from it?
Due to the fact that there are lots of misconceptions about this term, we’ll need to decompose it in order to provide the right answers.
Is MAP the same as Price-fixing?
No, but truth to be told, if done incorrectly, MAP can easily slide into Price-fixing, so this confusion does have a stronghold. This probably evokes more questions than answers, so let’s explain it in more detail.
As we already said, MAP determinates only the minimum advertised price, which is a completely different thing from the selling price. In other words, this may not be the final price, but it is the one that will be advertised on the retailer’s website.
The key difference between MAP and Price-fixing lais in the fact that MAP is only a price suggestion, while Price-fixing represents a real contract. So, to make it even more clear, the MAP is a one-sided-policy, which means that the retailer is not obliged to accept it, while the Price-fixing is obligatory for both sides.
In legal terms, this means that a retailer can accept the policy, but in case he doesn’t want to do it, there is not much that you as a brand or manufacturer can do. Of course, in that case, the brand can take action in terms of different penalties for the retailer, but no legal consequences will arise. Arranged like this, MAP does not violate the terms of a free market.
The main confusion comes from the fact that you can find information that says that you should sign a contract with a retailer regarding the minimum price that they are allowed to sell your products. This would be Price-fixing and you must avoid it by all means because it’s illegal.
Does that mean that MAP is legal?
Yes and no. The answer depends on the country which we are taking into consideration. In countries like the USA, or Canada MAP is completely legal, because it is referred only to the minimum advertised price, and not the selling one, as we have already explained. However, in the UK and most of the other European countries, it is still seen as a type of price-fixing.
Therefore, a brand that wants to be present in markets around the globe should be very careful and do the research before taking any action in order to avoid legal repercussions.
Can retailers go around the MAP policy?
Yes, they can. As we have already said, the MAP policy is not obligatory, which gives retailers the right to advertise the product above the minimal price, but at the same time, if they want, to sell it by another. Retailers can offer different discounts to attract the customers and by doing so, they are affecting the selling price, but not the advertised one. So, technically they aren’t breaking the MAP agreement.
Having all this in mind, you should be aware that the MAP policy is not a suitable solution for every manufacturer or brand. It represents the best solution for big companies with the notably brand value associated with the brand’s image on the market.
For them, it’s of extreme importance to maintain the same level of prices, because that is one of the key points for differentiating their brand from the competitors. Their high price stands for quality, tradition, taste and all the other social aspects whit which the buyer identifies himself by using this brand.
Therefore, the price drop would affect the brand’s image. On the other hand, there is not much sense in using MAP policy for highly commoditized products, such as groceries and other consumable items.
Who gets the benefits from the MAP policy?
As mention above, it is clear that strong brands gain the most from using MAP. But, it wouldn’t be incorrect to say that the whole market can sense the benefits too. By using MAP, brand and manufacturers not only protect their brand image but also gain an insight into which retailers are trustworthy.
By respecting the agreement, retailers gain a long-term collaboration with a brand which is often followed by some kind of rewards and new clients in the future. For customers, the benefits are shown in terms of knowing what product price is the most suitable for them so that they can avoid being tricked into buying something more expensive then it actually is.
- Maintain brand awareness and value
- Protect seller margins
- Promote fair pricing and competition among different brands
- Protect small retailers in order to compete with big ones
How to detect MAP violations and protect your brand?
The best way to approach this problem is by having a system that enables you to monitor your retailer’s performance 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. It also has an option of alert mail, which means that you’ll get informed right away when an online store violates the MAP.
A great benefit is that MAP violation can be monitored across different markets and even currencies. By using this solution, you’ll be able to: detect violations (and be automaticaly informed when they happen), make sure your retailers know that you have a reliable way of monitoring their pricing policies, and as well to identify which retailer was the first in making the price change.
When brands or manufacturers get this information, they can decide will they continue further collaboration with that retailer, or will they end it.
Wrapping it up
In the end, the brand has the last word when it comes to implementing MAP policy or not. If they decide to proceed with it, the main advice would be to remain consistent and transparent. It is important to obtain all the necessary legal information in order to avoid serious legal problems.
So, if used properly, MAP could be beneficial for everybody – it would create a healthy competition between retailers, help brands to maintain their image and provide customers with the right choice and information.
How well informed are you about MAP regulations? Write to us in the comment section below!