If you're in retail, you have to deal with the hurdles of minimum advertised pricing (MAP). MAP is meant to protect the manufacturers of products, but it can handcuff a retailer when it comes to advertising those products.
Here's what you need to know about MAP pricing and how it will impact your business.
What Is MAP Pricing?
In its simplest form, MAP is the lowest price a retailer can advertise the product for sale. To clarify, this does not refer to the lowest price they can sell it for in their store—just the lowest that they can show online or in an advertisement.
For example, Bose may have a MAP price of $999 for one of their speaker systems. If you put it in an ad, you may not show a price for sale lower than $999. It doesn't matter if that ad is online or in print; the rules are the same.
What Is the Difference Between MAP and MSRP?
Another common term is Manufacturer’s Suggested Retail Price or MSRP, which refers to what the manufacturer of the product believes the item should sell for. MAP pricing only addresses advertising of the product, whereas in the case of MSRP, the manufacturer is telling retailers what they believe the price of the product should be.
MAP pricing is meant to protect the MSRP. For example, if a manufacturer is trying to build a premium brand (Lexus or Tiffany's, for example), they do not want their merchandise advertised at deep discounts. It sends the message to the consumer base that the products are not actually worth the MSRP.
Since minimum advertised pricing only relates to “advertised” pricing and does not tell a retailer what they can sell it for in their store, this practice is legal under U.S. antitrust statutes.
MAP and Online Sales
Online retailers have to follow MAP as well. However, online retailers have figured out a way to sell below MAP online that the courts and Federal Trade Commission (who oversee pricing issues) have permitted.
The FTC says that the price displayed in a secure or encrypted shopping cart isn’t subject to MAP because it’s technically not advertising. Instead, the shopping cart of the online store is much the same as a brick-and-mortar store. So in an online world, the price paid by a customer may legally end up being lower than MAP.
Is this fair? Well, online retailers believe it is. They simply add a disclaimer that states "price displayed in shopping cart." And then the actual price to be paid is displayed there versus on the product's page on the website.
Brick-and-mortar retailers argue that they cannot place a newspaper or ROP ad that shows the MAP price with a "disclaimer" that says "actual price paid in the store is less." So they are distressed about this practice. After all, customers simply add the item to the cart and then look to see the price. They do not even have to buy it or give any credit card info to find out what they might actually pay.
Penalties for Advertising Below MAP
There are potentially serious repercussions for advertising below MAP. For one thing, the manufacturer has the legal right to pull their products from your store and restrict you from selling them again. In some instances, vendors have been known to require a refund of any co-op funds they may have given the retailer during the time the infraction occurred.
It is the best practice to honor and follow MAP policies. It shows you are a good partner and motivates the vendor or manufacturer to help when you need it, like taking back stock when it does not sell.