What is map pricing?

MAP Pricing (Minimum Advertised Price)

MAP pricing, or Minimum Advertised Price pricing, is an agreement between a manufacturer and its distributors or retailers regarding the lowest price a product can be advertised for. It doesn't prevent retailers from selling the product for less, but it does restrict how low they can advertise it.

Key Aspects:

• Purpose: The primary goal of MAP pricing is to protect brand image and profit margins. Manufacturers use it to prevent a "race to the bottom" where retailers continually undercut each other, potentially cheapening the brand in the eyes of consumers and eroding profitability for everyone in the supply chain. It can also ensure a level playing field for smaller retailers who may not be able to compete with larger retailers on price alone.

• What is Covered: Typically, MAP policies cover any form of advertising, including:

  • Online advertisements (e.g., Google Ads, social media ads)
  • Print advertisements (e.g., newspapers, magazines)
  • Broadcast advertisements (e.g., TV, radio)
  • In-store signage

• What is NOT Covered: MAP pricing generally does not restrict the price at which a product is sold. Retailers are free to sell the product for less than the MAP price, provided they don't advertise that lower price. This might happen through in-cart discounts, coupons, or other methods.

• Enforcement: Manufacturers are responsible for monitoring and enforcing their MAP policies. This often involves tracking advertisements and issuing warnings or penalties to retailers who violate the policy. Penalties can include withholding products, suspending accounts, or even terminating the relationship.

• Legality: MAP pricing legality can be complex and varies by jurisdiction. In many places, it's generally legal as long as it's implemented unilaterally by the manufacturer. This means the manufacturer sets the policy and enforces it without conspiring with other retailers. If there's evidence of collusion among retailers to maintain prices, it could be considered illegal price-fixing.

• Benefits:

  • Maintains brand image and perceived value.
  • Protects profit margins for manufacturers and retailers.
  • Creates a more level playing field for retailers.
  • Encourages retailers to compete on factors other than price (e.g., customer service, product knowledge).

• Challenges:

  • Difficult to monitor and enforce, especially online.
  • Can be perceived as anti-competitive by some consumers.
  • Requires careful legal compliance to avoid price-fixing accusations.
  • Retailer resistance if they believe it limits their ability to compete.