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How Minimum Advertised Pricing Impacts Your Retail or Online Store’s Marketing Efforts

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How Minimum Advertised Pricing Impacts Your Retail or Online Store’s Marketing Efforts

By Caron_Beesley, Contributor
Published: March 6, 2013 Updated: March 6, 2013

If you run an online or retail business, did you know that you might be prohibited from advertising a manufacturer’s products below a certain minimum price?

Minimum advertised pricing (MAP) policies are particularly critical to manufacturers who sell their products for online resale, given the ease at which consumers can now conduct online and mobile price comparisons. MAP policies are also established to help small businesses compete and sell on service and value, rather than entering into a price war with cost-cutting big box stores.

But how legally enforceable are these minimum advertised pricing policies and, as a small business owner, is there a way to get around them in your sales and marketing practices?

The Truth About Minimum Advertised Pricing

Minimum advertised pricing only relates to “advertised” pricing and is perfectly legal under U.S. antitrust statutes. So, essentially, you are limited to advertising MAP-protected products at a certain price, but you can sell these products at any price you choose (often guided by the Manufacturer’s Suggested Retail Price or MSRP).

What Does this Mean for Online Businesses?

Under typical MAP agreements, online retailers can’t “display” any prices that fall below the MAP price. But which part of an online store actually represents advertising display space has caused quite a bit of controversy. For example, say a product is listed on a site for $10. Once a coupon code or other incentive is applied, the actual shopping cart price could come down to $8. Is that still considered “advertising” since a transaction technically hasn’t yet occurred, or is it a commitment to buy and outside the scope of a MAP agreement?

The difference between an advertised price and an actual price that you may be charged has come under scrutiny by U.S. Circuit Courts and FTC rulings, which tend to agree that an actual price displayed in a secure/encrypted shopping cart isn’t subject to MAP – because it’s technically not advertising space, but represents an actual storefront. So in an online world, an actual price may legally end up being a lot lower than the MAP-required advertised price.

In fact, manufacturers are often advised to focus their MAP policies on advertised prices in paid search ads, shopping comparison ads, and internet landing pages but not in shopping carts or other point of sale interfaces.

Look for Alternative Ways to Discount

While it’s not always advisable to lead with price in your marketing efforts, look for other ways to attract customers without breaking any MAP agreements. For example, many manufacturers are okay with your offering free shipping, coupon codes, or a “buy-one-get-one at a discount,” if MAP doesn’t protect that other item. Essentially, as long as the dollar value of the MAP-protected product isn’t reduced, then you are okay. Be careful with coupon codes. It’s safer to advertise the coupon—not the product that it can be applied against—so as not to imply that you are advertising the MAP item at a reduced price. Instead, be clear about what items are excluded from any coupon code promotion.

The Bottom Line

If you are unsure about how your online advertising and marketing practices may border on breaking any MAP agreement you have with a manufacturer, talk to them or consult a legal attorney. Manufacturers do monitor their dealers for potential violations and the law is constantly in flux on this one, so do your due diligence.

For more information about the legality of MAP policies, check out the Federal Trade Commission Guide to Antitrust Laws.


 

 

About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Comments:

Really like the content Caron. I think it is an error to try to always be low cost. Organizations who contend completely on low cost continually end up harming themselves and the whole market they are in. If you are able to make a great product devoted to awesome client support and high top quality of work, then the organization will last much more time and you will have much more happy clients. http://www.oliacoupons.com/store/godaddy-coupons/
I see this happening allot in my business sector. Many items are drop-ship items and some dealers really hurting the business by selling $500-1000 items and making about $10 profit. They get most of the sales because consumers "save" money by shopping with them, but it really hurts all the dealers who put allot of effort into advertising the product and staying with the MAP.
:While it’s not always advisable to lead with price in your marketing efforts, look for other ways to attract customers without breaking any MAP agreements. For example, many manufacturers are okay with your offering free shipping, coupon codes, or a “buy-one-get-one at a discount,” if MAP doesn’t protect that other item. Essentially, as long as the dollar value of the MAP-protected product isn’t reduced, then you are okay" This is a way for dealers to sell below MAP. For example, Free Shipping. Nothing is free, the dealer has to pay for the shipping which comes out of the cost of the items, thus it really lowers the price below MAP. If all dealers would sell the value of the product, rather than price, the American consumer could be better informed and desire that product, paying a higher price. However, dealers have now done an injustice to the industry. They've created a consumer that cares nothing of value, just how cheap can I get it. MAP is not about, "help small businesses compete and sell on service and value, rather than entering into a price war with cost-cutting big box stores". It's about protecting the manufactures' product integrity and helping small business, and large for that matter, hold margin and pay the bills. But because dealers are so "hungry" for market share they are willing to do what they can to race to zero margin just to get this business. This is not a good business practice.
MAP agreements are run counter to the spirit of free enterprise. They are put in place through coercion (If you want to carry our products you WILL sign) and enforced with a form of extortion. Manufacturer's are free to set THEIR prices to you but they should have no say in how you set your prices to your potential customers. This is NOT free enterprise and Congress should pass legislation making these agreements illegal!
Wow! I was unaware of this process. This is great information, and is very valuable in today's virtual world. I have been in a local store and seen customers checking pricing on their phone before purchasing, so having MAP pricing can be important to keep some organizations from undercutting the competition just to make more sales.
Afordable Advertised Pricing, I again come here and discuses online businesses thanks..
Great story, really appreciate it. I have a small coupons website and it was very hard to find a good developer, they always ask for a lot of money
Thank you for this blog post! Unfortunately there isn't enough information like this for people looking to start online retail stores. Most people think they can set their prices, sales, etc at whatever rate they want .... so this information is good to have.
Love the article Caron. I think it is a mistake to try to always be low price. Companies who compete solely on low price consistently end up hurting themselves and the entire industry they are in. If you are able to create a great brand dedicated to amazing customer service and quality of work, then the company will last much longer and you will have much happier customers.

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