Good chemistry is important for a team to be successful. If winning is the prime directive, management is playing with fire by risking showing any kind of favoritism toward certain players. Shaq soured on the Lakers when he thought management favored Kobe. Bad chemistry has broken up many a dynasty. Tom Brady bolted New England when he felt management didn’t properly value his contribution. After being fired and replaced, the San Diego Chicken won a lawsuit so he could strike out on his own.
Without a formal MAP policy, ecommerce brands are playing with a similar kind of fire with their online sellers. It requires sellers to comply with a minimum advertised price (MAP) in order to carry your products.
Some sellers attempt to drive your prices to the ground to gain a competitive advantage. Sellers who can afford to eat into their margins will go lower and lower, and the ones who can’t will simply stop carrying your products.
A clear, well-defined MAP policy serves as a warning to sellers: “We’re watching you. And if you violate our MAP, there will be consequences.” As sellers learn that you’re taking your pricing seriously, your prices will become less volatile, your margins will be more sustainable, and your customers will have better experiences with your brand (because they’ll buy from the best sellers, not the cheapest).
MAP policies provide many benefits: they level the playing field and encourage sellers to compete on customer service and shopping experience rather than on price. And by normalizing your price, they make it easier for customers to tell the difference between your authentic products and cheap knockoffs.
In this guide, we walk you through how to actually create a MAP policy. But first, there are a couple of things we need to address.
Is a MAP policy a pricing agreement?
A pricing agreement is when sellers and product manufacturers collude to fix the price point of a given product. It can be formal or informal, but the key is that sellers and brands work together and agree on a set price. Pricing agreements aren’t always illegal, but there are many ways in which they can easily violate antitrust laws.
A MAP policy is not a pricing agreement because it’s unilateral: you set the lowest price your products can be, and your sellers don’t “agree” to it. You’re simply informing them that if they violate your price, they will receive penalties and may lose the ability to carry your products.
Do not let retailers participate in the process
Your sellers should have no say in your MAP policy. The moment you allow them to review preliminary MAP documents or help you identify ideal price points, you open the door to potential lawsuits and costly litigation from regulatory bodies. Creating your MAP policy should be an internal process, and your sellers should only see the final result.
There is, however, one entity who should be intimately involved in the process and may or may not be outside your organization: a lawyer.
Collaborate with an antitrust lawyer
A MAP policy is a legal document. It defines a legal process for penalizing and potentially eliminating sellers who violate it. Your MAP policy is also designed to accomplish specific goals based on your brand’s unique circumstances. It’s vital that this document clearly, precisely articulates things like:
- What constitutes a MAP violation
- What happens when a violation occurs
- How the appeals process will work
You don’t want to just copy and paste a MAP policy you found online or used with another brand. It needs to be custom-made every time. And you’ll want to understand exactly how the terms of your MAP policy translate to your relationships with retailers and third-party sellers. If you try to produce this without the help of someone who lives and breathes antitrust laws, you risk leaving your business vulnerable to legal trouble.
(An antitrust lawyer should also play a key role in the MAP enforcement process.)
Identify the problems your MAP policy needs to solve
A MAP policy is a solution to a problem. Maybe your prices vary too much from seller to seller, or your products are consistently priced far below what they’re worth. Maybe your best partners have been complaining about problems sellers or their margins being unsustainable. Perhaps you simply have too many sellers in one place, or too many unknown sellers.
There could be certain times of year where your price drops significantly, or you might only be having issues with specific SKUs.
The unique problem you’re trying to solve should shape things like what you consider a violation, what kinds of penalties you’ll issue, how those penalties escalate, and whether you’ll create a path to redemption.
The success or failure of your MAP policy hinges on whether it solves your unique challenges, and designing your policy with these goals in mind will ensure you don’t create one that, say, forces you to terminate a quality seller or gives so much leniency that some sellers simply ignore it (because the penalties are outweighed by the gains of violating your price).
Define what MAP violations look like
It might surprise you to learn that there’s quite a bit of variance about what a “minimum advertised price” encompasses. You can’t assume that every seller will have the same interpretation of MAP. If you leave a loophole, someone will exploit it.
Some MAP policies focus purely on prices advertised online or through electronic communication channels. These are sometimes referred to as internet MAP (iMAP) or electronic MAP (eMAP) policies. Depending on how they’re presented or how much harm they’re causing, you might want your MAP policy to encompass in-cart pricing as well.
You might also have different tiers of violations depending on specific circumstances. For example, if a seller only violates your price after another seller (because they have to in order to stay competitive), that’s still a MAP violation, but it’s less problematic than the seller who initially set off the domino effect by dropping prices below everyone else’s. These “violation leaders” are the sellers it’s most essential to curb or eliminate.
Your MAP policy needs to define precisely the circumstances in which a seller will be considered in violation. An antitrust lawyer will be able to help guide you through the kinds of situations your policy covers, any gaps you’re leaving, and whether these gaps actually affect your ability to achieve your goals.
Clearly outline penalties for violations
You can’t decide what penalties you’ll issue on a case-by-case basis. Your MAP policy needs to define a clear “if this, then that” progression that includes the number of penalties or “strikes” you’ll issue, as well as what each level of penalty will entail.
Depending on your goals, you may or may not want to include warnings before issuing your first penalty and before terminating a seller. If a seller is looking to take advantage of you, warnings are freebies — especially if your policy includes a system for sellers to progress back to square one with good behavior.
The important thing is to choose penalties that align with your intent and appropriately address the problem. Just as you don’t want to be too soft on MAP violators, you also don’t want to create overkill that damages key relationships.
For example, cutting off a seller’s access to your supply chain is a pretty steep penalty, especially if the duration you apply the penalty for causes them to miss multiple shipments of new inventory. That “out of stock” label is especially devastating in marketplaces. Applying a penalty like this on the first offense could scare away some sellers who respect and value your brand. But it could certainly be an appropriate response to someone’s third or fourth violation.
Create a pathway to terminating seller relationships
Regardless of your goals and the number of penalties you allow, your MAP policy should include a final option to cut ties with a seller altogether. If you don’t plan for this, you’re committing to allowing violations to persist, and to eventually circle back to add it to your MAP policy later anyway.
A seller that pushes the upper limits of your penalization system is probably doing more harm than good to your brand. Their sales are coming at a cost to your brand integrity, your customer experience (because they’re winning sales through price manipulation and not service), and your reputation with other sellers. Your best retail partners will watch in disappointment as these low-quality sellers walk all over you.
Establish incentives for compliance
Sometimes the carrot is more effective than the stick. Your MAP policy doesn’t have to feel like a pricing minefield. With a compelling incentive structure, you can position compliance with your MAP policy as an opportunity. You might reward MAP-compliant sellers with market development funds they can use to promote your products. Or, if you use a where to buy solution, you could make compliant sellers eligible for more prominent positions on your seller lists, sending more traffic their way from your website and other marketing efforts.
The same as with penalties, your MAP policy should clearly establish the process for earning and receiving incentives. You can’t simply award incentives to your favorite sellers; everyone needs an equal opportunity to earn them.
Consider exceptions for holidays
On Black Friday or other holidays that are critical to your niche (such as Valentine’s Day or Independence Day), you may want to include a special “promotional MAP” (PMAP) that allows sellers to price lower on these special occasions. This ensures that your prices on these days will be lower than any other time of year, enabling sellers to promote them more heavily and increase demand. Establishing a PMAP is particularly important if you lose more sales to competitors at these times of year because they offer steeper discounts.
Explain the appeals process
Sometimes mistakes, errors, and accidents happen. Maybe a human error (on your end or the seller’s) resulted in a MAP violation that was too brief to cause tangible harm. Or there was a system error of some kind that rendered a “false positive” violation. Whatever the case, it’s important to recognize that there will be times your sellers want to argue about the validity of a penalty they received. As soon as sellers learn that you take your policy seriously by tracking violations, they will start appealing penalties every chance they can.
Your MAP policy should outline what this process looks like so that there are no surprises. It also shows sellers that you can be understanding and value your relationship with them.
The main challenge with appeals is that your application of penalties and handling of the appeals process has to be consistent across the board. It doesn’t matter what your relationship with a seller is; you have to treat every seller equally. That’s why you should always send appeals straight to your lawyer. Don’t even let an employee reply. This simplifies the process on your end and removes the risk that an employee’s response will create the perception of favoritism.
Recap: The MAP policy template
Together with an antitrust lawyer, you should create a MAP policy that outlines the following elements:
- What a MAP violation looks like
- Incentives for compliance
- Penalties for violations
- Cause for termination of the relationship
- The appeals process
- Any exceptions and/or special considerations, such as PMAP
Remember: your MAP policy needs to reflect your brand’s unique situation.
Distribute your MAP policy to sellers
Once you’ve finalized your MAP policy, it’s time to put it in front of every partner. This isn’t a document you can afford to get buried in other communications. Simply sending it isn’t good enough. You want every seller to read it, understand it, and abide by it. If you press send and wash your hands of the matter, you’re running the risk that the violations will start pouring in simply because nobody read it.
Send it through every channel you can. Make sure your partners have easy access to it. Ask if they have questions. Do not ask for their input. And confirm that they’ve seen it.
Modify your policy over time
Since your MAP policy is designed to solve specific problems, the time will come when they’re all solved. Maybe you were trying to reduce the number of sellers per marketplace, and you reached your goal. Perhaps you just needed to normalize a price point, and you’re there. Whatever the case, your MAP policy doesn’t have to be a static document. It can be dynamic, changing in response to new problems that arise and evolving when you accomplish your goals.
Every time you revisit your MAP policy, bring an antitrust lawyer into the process and begin with your objectives in mind.
Once your policy is out in the wild, all that’s left is to monitor and enforce it.
Simplify MAP enforcement
Even the best MAP policies are worthless without MAP enforcement. Your sellers need to know that your MAP policy matters and you’re taking it seriously. You need to actually monitor your SKUs and administer penalties.
For that, most ecommerce brands use MAP monitoring software. It automatically tracks your prices everywhere they appear, notifies you when there’s a violation, and populates everything you need for enforcement.
Prowl is the world’s most advanced MAP monitoring software. If you want to track everywhere your products appear and streamline the MAP enforcement process, you won’t find a better solution. See for yourself.
