Could MAP be considered an antitrust violation?

[MikeTheNewbie]

I just read an email from an online vendor stating they "can not give coupons for many MAP products because the manufacturer believes it violates MAP"
Evidently I'm not very familiar with the law but lately the FTC has been quite active and I've been reading some articles about what the FTC does. This MAP situation in the aquarium industry feels pretty much like what the FTC tries to prevent. Companies coordinating with others so prices don't go down.

Does anyone know more about this?

 

[Daniel@R2R]

This comes up from time to time. Some who have more info than me will chime in I hope, but the general consensus every time I've seen this topic is that MAP doesn't violate any laws.

 

[MikeTheNewbie]

Found a doc from the FTC, not conclusive but still feel the MAP is not OK

Competition Counts

Competition Counts is a non-technical overview of how the FTC’s Bureau of Competition protects

www.ftc.gov

Another one that talks about price fixing, will check that out in a few

Pricing Policies That Protect Your Brand

When customers seek out online deals, it seems like a win for everybody: Brands, retailers, dealers, and distributors sell more goods, and buyers get a bargain. What’s not to like? Here’s the problem: Lured by rock-bottom online prices, customers often end up dealing with disreputable digital...

hbr.org

 

[Reefer Matt]

MAP or Minimum Advertised Price, policies are meant to keep perceived product value up to ensure profit margins of a manufacturer. Retailers cannot advertise prices lower than the MAP without permission. They can, however, sell lower in person as long as they don’t advertise it. But some retailers may be scared to lose their accounts by doing so.

 

[topjimmy]

How is it any way like a monopoly?

 

[Dorking It]

Map is not min selling price. It is the lowest they can advertise for. They can sell less then that but choose to use "map" as the bottom line, buts it is not. So it's not price fixing. The vendor can sell at whatever price they want.

 

[Dorking It]

Matt said it. I should have read the hole thread

 

[Dinkins Aquatic Gardens]

Usually companies that want to get past MAP won't show the price until you put it in your cart. As has been said before, you can sell at any price, just not advertise it.

 

[JNalley]

MAP or Minimum Advertised Price, policies are meant to keep perceived product value up to ensure profit margins of a manufacturer. Retailers cannot advertise prices lower than the MAP without permission. They can, however, sell lower in person as long as they don’t advertise it. But some retailers may be scared to lose their accounts by doing so.

Map is not min selling price. It is the lowest they can advertise for. They can sell less then that but choose to use "map" as the bottom line, buts it is not. So it's not price fixing. The vendor can sell at whatever price they want.

In purpose, that is what it is... However, it has been discussed here on numerous occasions that manufacturers threaten to stop supplying retailers who even sell at a lower cost if they find out about it... This is unique to this hobby though, as other manufacturers in other market sector allow sales at lower prices...

 

[FUNGI]

MAP or Minimum Advertised Price, policies are meant to keep perceived product value up to ensure profit margins of a manufacturer. Retailers cannot advertise prices lower than the MAP without permission. They can, however, sell lower in person as long as they don’t advertise it. But some retailers may be scared to lose their accounts by doing so.

MAP is there to "protect" retailers and has no real function on GP/GM of a manufacturer, as discounts to retail is either i) based on MSRP or ii) Net Pricing from manufacturers. A retailer can sell for whatever they want, but they cannot advertise anything lower then MAP. It allows for a better playing field for retailers while protecting the brand. Retailers are starting to get around that now buy advertising "Too Low To List" in their ad's.

 

[FUNGI]

In purpose, that is what it is... However, it has been discussed here on numerous occasions that manufacturers threaten to stop supplying retailers who even sell at a lower cost if they find out about it... This is unique to this hobby though, as other manufacturers in other market sector allow sales at lower prices...

I disagree,,,,it not unique to this hobby....I have MAP on some of my items I manufacture...(nothing to do with this hobby).....

 

[JNalley]

I disagree,,,,it not unique to this hobby....I have MAP on some of my items I manufacture...(nothing to do with this hobby).....

So you will drop a retailer if they sell your product at a lower rate in store even if your advertising it at the MAP price? Because that's the part I perceived as unique to this hobby, not MAP pricing overall...

 

[Reefer Matt]

MAP is there to "protect" retailers and has no real function on GP/GM of a manufacturer, as discounts to retail is either i) based on MSRP or ii) Net Pricing from manufacturers. A retailer can sell for whatever they want, but they cannot advertise anything lower then MAP. It allows for a better playing field for retailers while protecting the brand. Retailers are starting to get around that now buy advertising "Too Low To List" in their ad's.

Yes, it also protects the retailer’s profits as well. I am a small retailer myself who sells MAP products, but I don’t sell online.

 

[Reefer Matt]

So you will drop a retailer if they sell your product at a lower rate in store even if your advertising it at the MAP price? Because that's the part I perceived as unique to this hobby, not MAP pricing overall...

I believe car dealers and Apple inc. dealers are in the same boat.

 

[JNalley]

I believe car dealers and Apple inc. dealers are in the same boat.

I have bought many New cars below MSRP and Advertised price through haggling, and I see deals on Apple products in the form of "See price in cart" every once in a while... But according to this forum, many manufacturers (not just one or two) are ready to drop a retailer at the drop of a dime... I can't say with any certainty as I'm not a retailer buying from wholesalers or distributors, I can only repeat what I have read here... According to people supposedly in the know here, it's a much higher percentage in this sector than most others

 

[FUNGI]

So you will drop a retailer if they sell your product at a lower rate in store even if your advertising it at the MAP price? Because that's the part I perceived as unique to this hobby, not MAP pricing overall...

In store (street) pricing is not an issue as long as its not advertised. We usually warn a retailer first and its usually fixed: i,e, below is email response from retailer to me:
XXXX
Done and done. Sorry about the violation. Was an oversight, not intentional.
If anything like this comes up in the future, you can email me directly. You can also copy xxxx@xxxxxxxx.com, who handles the website (and gets way less emails than I do, and is more likely to respond quickly). If pricing is messed up, he’ll be the one to fix it.

 

[gbroadbridge]

I just read an email from an online vendor stating they "can not give coupons for many MAP products because the manufacturer believes it violates MAP"
Evidently I'm not very familiar with the law but lately the FTC has been quite active and I've been reading some articles about what the FTC does. This MAP situation in the aquarium industry feels pretty much like what the FTC tries to prevent. Companies coordinating with others so prices don't go down.

Does anyone know more about this?

Interesting discussion, as in my country (Australia) such price fixing is illegal.

 

[Biokabe]

So you will drop a retailer if they sell your product at a lower rate in store even if your advertising it at the MAP price? Because that's the part I perceived as unique to this hobby, not MAP pricing overall...

Every company has its own MAP policy, and each of them is enforced differently. My company, for example, is only concerned with online sales - if one of our brick & mortar retailers wants to sell lower than MAP, we don't care in the slightest. But if one of our online vendors habitually breaks MAP - yes, we will cut them off. Even if they've been purchasing hundreds of thousands of dollars from us.

I get why consumers are salty about MAP, but if I can offer a different perspective: The company I work for has lost literally millions of dollars in revenue because we didn't have MAP. And more than three years after implementing MAP, we're still digging ourselves out of that hole.

I work for a wholesale gift company; my department specifically sells a brand of high-end French soaps and related products. For years, we advised our retailers to sell our soaps at "Keystone + 10" - basically, double the wholesale cost of the product (keystone) and add 10% to cover additional expenses (primarily freight). This wasn't an enforced MAP - just what most of our retailers had success with, and so that was what we advised our customers to do.

Then Amazon FBA became a thing. As we weren't a MAP-protected brand, we became very enticing to FBA resellers. The original ones stuck with our advice and listed our products on Amazon at rates similar to our brick & mortar customers. Then the second wave came. They wanted to capture the buy box, so they listed a little bit lower. Then Amazon wanted to recapture the buy box from resellers, so they listed a little bit lower. Then new people came in, and they listed a little bit lower still.

It was a race to the bottom, until eventually our products were priced all the way to the bone - if you factored in all of Amazon's fees and the purchase price of our soaps, the people who were actually selling our products were actually losing money with each sale. And everyone else, who wasn't willing to lose money on a sale, was instead forced to just sit on their unsold soaps on the hope that the price would come up.

Worse, this also filtered into our brick and mortar shops. Customers would come into the shop, see them listing the soap for 40-50% higher than Amazon had it, smell the soaps to figure out which ones they liked, and then go home to place the order on Amazon. So brick & mortar customers were losing sales. Amazon was losing sales. The people who were capturing sales were losing money. And our revenue absolutely tanked, because everyone was sitting on piles of soaps that they couldn't sell.

And that's when we implemented MAP, and yes - started dropping retailers who violated our policies. I had to send many of those emails myself. Didn't matter how big they were - if they were listing on Amazon in violation of MAP, their purchasing privileges would be revoked and we would decline and refund any future orders they tried to place.

You live or die based on your perceived value, and failing to maintain MAP is the fastest way to ensure your products lose value and become unsaleable. Once you get to a certain size, if you don't implement MAP you only have so long until retailers will refuse to carry your products.

 

[Doctorgori]

Interesting discussion, as in my country (Australia) such price fixing is illegal.

edited …

 

[FUNGI]

Interesting discussion, as in my country (Australia) such price fixing is illegal.

Its not price fixing.....has nothing to do with the actual end cost.....matter of fact, the ACCC almost approved it a couple of years ago.....