TrackStreet Blog

MAP Policy: Does it Constitute Price Fixing?

Posted by Andrew Schydlowsky (TrackStreet) on Aug 25, 2017 8:55:19 AM

One of the most common first questions my team and I receive from manufacturers and brands who contact TrackStreet for automated MAP monitoring and enforcement is: How can we make sure our MAP policy is legal?

MAP Policy

The question is understandable. A minimum advertised price policy is, after all, a manufacturer-imposed rule setting a floor on prices across the company’s entire resale channel. True, these prices relate only to advertising and do not create a selling-price minimum. But still, it sounds like a typical MAP policy could be at least creeping up to the price-fixing line, if not stepping over it. So where exactly is that line?

Here’s what you need to know.

 

WHAT MAKES A MAP POLICY LEGAL?

The first thing to understand is that a MAP policy addresses only the public display of a product’s price information — the advertised price. The policy is not meant to control the actual price at which a reseller can sell the product.

For this reason, assuming it is drafted and enforced properly, a typical MAP policy will be treated under antitrust law as a “non-price” restraint. That means in most cases a MAP policy will be able to avoid falling into the price-fixing trap.

  But in crafting and enforcing your MAP policy, you do need to take caution to ensure your program cannot be deemed a minimum “resale price maintenance” (RPM) agreement — which could in some cases be determined an antitrust violation.

Because an RPM would constitute an agreement between businesses at different levels of the market structure (for example, a manufacturer and its retail partner) to set the resale price of a product or service, that could be considered vertical price fixing.

 

Here’s a simple checklist to help ensure your MAP policy avoids the RPM price-fixing trap and stays on the right side of antitrust law:

  1. Draft and enforce your policy with a single, consistent set of rules for all resellers.

If you want to establish a rule that your company will stop supplying products to MAP violators, or institute other consequences for resellers who fail to follow your guidelines, that’s fine. Indeed, your MAP policy should include consequences for violations.

Just make sure your policy’s language — and, equally important, your enforcement of the policy — are consistent across your resale channel, and could not be interpreted as granting special treatment to any specific reseller or category of resellers.

 

  1. State clearly that your MAP policy is a unilateral statement.

One of the reasons that most properly drafted MAP policies are legal is that they aren’t agreements but rather one-way statements.

Yes, the “Policy Enforcement” section of your MAP policy will send a clear message to your resale partners that they should adhere to the policy if they want to continue enjoying a profitable, mutually beneficial relationship with your company. But that does not constitute a two-way agreement, and that’s one key to staying on the right side of the law.

Your policy should clearly state that your resellers are free to establish their own advertised prices for your products — at, above or below your MAP levels.

You can’t ask your resellers to sign a promise to follow your MAP guidelines — or even to shake on it, nod their head or blink twice if they agree.

 

  1. Don’t ever negotiate or discuss the terms of your MAP policy with your resellers.

This is another antitrust trap that can ensnare even a manufacturer acting in good faith. According to antitrust law, an act would be deemed illegal price fixing only if it included some sort of agreement between businesses colluding to eliminate competition or otherwise unfairly stifle the market to benefit themselves.

With that in mind, you can understand why it is so important not to speak with your resale partners about your MAP policy, and certainly never to put any discussion about the policy’s terms in writing.

Even if you’ve written your MAP policy properly to avoid potential legal violations, one of the ongoing risks is that you will have a conversation with a reseller about your MAP prices or some other aspect of your MAP policy — and that discussion could later be deemed a step toward price fixing.

Your safest course of action, then, is to have a consistent policy never to discuss MAP details with any reseller. If a retail partner contacts you with a question, you should refer them to the MAP policy itself.

Follow those rules, and the chances are your MAP policy and your company’s enforcement of it will be perfectly legal.

And if you need help with any aspect of your MAP policy — including deploying an automated MAP monitoring and enforcement solution, schedule a free demo.

Topics: MAP, map policy