What is the MAP/ MSRP and the risks of non-compliance for retailers

MAP (Minimum Advertised Price) is the minimum advertising price that a brand claims for its products. Retailers cannot advertise a product online or in stores priced below the MAP. The Minimum Advertised Price is mandatory, and violation of it may result in penalties from the manufacturer.
MSRP (Manufacturer's Suggested Retail Price) is the price that the manufacturer recommends setting for selling the product to the end consumer in stores and from the pages of Internet resources. The manufacturer's recommended price is a guideline for the seller and is well above the MAP.

MAPPrice control, price control on the Internet, price control in online stores and Marketplaces - why and to whom it is important, we will consider in this article

What is it MAP?

For a buyer, price is a critical factor in making a purchasing decision, and dynamic pricing helps a business gain a competitive edge. But, in the race for the consumer, retailers sometimes set too low prices, thus violating the rules of fair competition.

Recent years have seen a boom in online sales, forcing brands to implement Minimum Promotional Price policies to protect their reputation.

MAP is the minimum advertised price for a product below which sellers cannot sell or advertise it. The MAP is approved by the manufacturers of these products. For example, if a manufacturer of household appliances has set a minimum advertising price of $200 for a specific model of a washing machine, then the price in advertisement for this product cannot be lower. Regardless of whether it will be a print publication or the Internet.

The manufacturer's suggested retail price also will be abbreviated as MSRP (Manufacturer's Suggested Retail Price).

MSRP

An industry such as the automotive industry depends on the MSRP. Manufacturers recommend that dealers set this price for car sales and display it on a sticker on the window. The formation of MSRP is influenced by production costs, the make and model of the car, the region of sale, and the trim material. In different regions of the country, the price recommended by the manufacturer may differ.
In any case, the MSRP is only a manufacturer's setting for the dealer.
Retail items such as electronics and home appliances have an MSRP. By setting the MSRP, the manufacturer expects that this price of the product will be the same for all sales channels and will allow all market participants to receive the expected profit.

The formation of the minimum advertising price takes into account a decent profit for retailers. Some retailers sell the product below the advertised price, but the MAP is shown in the store or on the pages of online stores.

MAP policy provides a level playing field for retailers. They have the option to increase margins or volumes. In addition, MAP is a guarantee that brand depreciation will not occur due to constant price wars between competitors.

       What is MSRP?

MSRP is the manufacturer's suggested retail price. MSRP is sometimes referred to as the "sticker price". In essence, this is the price at which, in the opinion of the manufacturer, his product should be sold.

The need to adhere to the manufacturer's recommended retail price is not mandatory. According to the law, the manufacturer has no  grounds to force retailers to adhere to the recommended retail price.

MSRP is a guide for the retailer and the buyer about the true value of the goods.

The recommended retail price allows you to unify the cost of goods from all sellers on the market and is set for each individual unit of goods. MSRP is formed taking into account all costs for the sale of goods.

  • Production costs,
  • Logistic costs;
  • Product promotions,
  • Trade margins,
  • Taxes, etc.

This approach to the formation of the recommended price takes into account the interests of all market participants - the manufacturer, distributors, retailers.

MAP and MSRP - what is the difference?

MSRP is only advisory in nature - this is its main feature.

The recommended retail price is aimed at regulating offline and online sales.

MAP is, first of all, the minimum advertising price, but legally approved.

We can say that MSRP is an upper unofficial price threshold for a product, and MAP is an officially approved lower price threshold. The MSRP is the benchmark for the consumer, while the MAP is for the retailer.

Example:

The MSRP policy is often used in the automotive industry.

Manufacturers recommend that dealers set this price for car sales and put it on a sticker on the window. The formation of MSRP is influenced by production costs, the make and model of the car, the region of sale, and the trim material. In different regions of the country, the price recommended by the manufacturer may differ.

In any case, the MSRP is only the manufacturer's setting for the dealer for the initial asking price of the vehicle. But, according to the law, all new cars must have a sticker on the glass with the manufacturer's recommended price.

For those retailers looking to price their product above the MSRP, they first need to understand the market thoroughly and understand the dynamics of demand. Otherwise, they will face the problem of falling sales volumes, which will not benefit either the seller or the manufacturer.

On the contrary, the urge to lower the price below the MAP leads to an increase in the sales of one player and hurts the sales of others. As a result, chaos sets in, as a result of which the market can “collapse”. With the collapse of prices, the reputation of the manufacturer's trademark also suffers. In this case, the seller faces a ban on selling the product or stopping cooperation with this brand.

MAP and MSRP strategies intersect and pursue the same goal - brand protection and prevention of price wars. Therefore, the most advantageous option is their ratio.

The most significant difference between MAP and MSRP prices is their legality. An MAP-based pricing structure is perfectly legal in the US, but in the European Union, minimum promotional price controls are not legal. However, offering goods at MSRP prices is a universal practice for both regions.

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         MAP policy for brands and its benefits.

    An MAP policy is a formal legal document in which brands establish the lowest possible price that can be used in advertising a product. In addition to the fact that the document prescribes the minimum advertising price, it provides for penalties for violation of the MAP and the actions of the manufacturer in case of violations by the seller.

    MAP policy is necessary to protect against unreasonable price cuts by the seller in order to maintain competitiveness.

    The document in which the company's MAP policy is formulated is always developed by lawyers in accordance with the law. The MAP policy is not universal or standard. In each case, lawyers develop an MAP policy, taking into account the characteristics of the business and its needs and objectives.

    Before implementing MAP, brands need to inform all retailers of their policy to avoid misunderstandings and broken relationships.

         Application of the MAP policy in the European Union and the USA

    US MAP policy

    In the US, manufacturers strictly enforce MAP policies and are required to document their actions in the event of breaches of minimum promotional prices.

    What a brand can do in case of violation of the MAP policy:

    1. Impose a fine. If a retailer has violated the MAP policy, the manufacturer can apply penalties to him.
    2. Suspend or completely break partnerships.
    3. Prohibit participation in promotions for a certain time.
    4. Refuse to restock the seller's product after it has sold out.

    Most vendors do not seek to violate the MAP and in some cases report competitor violations to suppliers themselves.

    In the US, MAP is legal under federal antitrust law because the controls are on the promotional price, not the final sale price.

    EU MAP Policy

    In the EU and the UK, limiting minimum advertised prices is a violation of current competition laws. There have been cases where British and Australian producers have had to pay fines to authorities for trying to control Minimum Advertised prices.

         MAP in online trading (IMAP)

    With the advent of Internet commerce, such a thing as IMAP appeared.

    Internet Minimum Advertised Price (IMAP) - the minimum retail price for selling goods online. An IMAP policy is an agreement between a manufacturer and a seller that sets the lowest price for advertising a product on websites.

    Previously, MAP policy was developed for physical advertising media - catalogs, newspapers, magazines, billboards, etc.

    But the e-commerce market is different from other media and offline stores. Brands needed to adjust their traditional IDA policies and develop a dynamic minimum promotional price policy for e-commerce.

         Six Methods for Creating an Effective MAP Policy

    We encourage you to use these practices to create an effective IDA policy.

    1. Develop an individual MAP policy.

    Don't use ready-made MAP policy templates, but create your own based on your goals and needs. In this case, it will be effective and work for your business. Contact lawyers for assistance in drafting a document in accordance with applicable antitrust laws.

    1. Do not involve retailers in the creation of MAP policies.

    If some retailers participate in the creation of MAP policy, this will be a violation of the rights of other retailers, which is regarded as a violation of antitrust laws.

    1. Consider rewards for retailers who adhere to the requirements.

    Some manufacturers set up dedicated funds to cover retailers who strictly follow MAP policies for marketing. In this way, brands help them maintain their competitive edge.

    1. Enter seasonal promotions.

    During seasonal sales or Black Friday, many manufacturers do not require compliance with the MAP policy. This will increase sales and profits for retailers. But, in order to avoid loss of reputation and own profitability, it is not necessary to offer such promotions often.

    1. Communicate with retailers.

    Complex legal documents are not always easy to understand, so brands must communicate their strategy to retailers in an accessible way through videos, presentations, additional trainings.

    Make every effort to ensure that retailers understand what needs to be done to comply with your MAP policy.

    1. Regularly monitor compliance with your MAP policy.

    Price Monitoring is the main control method and a key part MAP policy. Systematic price tracking on sites of online stores, marketplaces, social media, and price comparison sites is an effective way to ensure compliance with MAP policies.

    For each violation, legal actions of the manufacturer to must be provided. Moreover, these actions must be consistent and apply to all offenders. Inconsistency may result in retailers not seeking to comply with your MAP policy.

    If you think that banning a retailer from selling a product could hurt your sales, don't be afraid, it will only benefit your business in the future. This way you will show that the rules of the game are the same for everyone.

    What is MAP

    AUTOMATED PRICE MONITORING ON THE INTERNET is daily up-to-date information about the prices of your customers for your product.

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      The trend towards even more rapid development of the e-commerce market encourages manufacturers to control the prices of online stores. And manual monitoring is no longer enough. Automation of the monitoring process has become a must-have for every large business.

      Regular price tracking on sites of online stores, marketplaces, and price comparison sites is the primary way to ensure that your MPA is being followed.

      Price Control software allows you to track prices on all marketplaces on the Internet and find all resellers of your products.

      What will MAP monitoring in Price Control gives you:

      1) We will find all sellers of your brand in the market.

      2) We will trace all unauthorized sellers and offer solutions to eliminate them.

      3) Monitoring in Price Control will reduce your operating costs for engaging your employees to monitor compliance with IDA policies by retailers.

      4) Our solution will help identify counterfeit goods on the market.

      5) Systematic monitoring will expand the client network, turn unauthorized sellers into legitimate ones.

      6) You will be notified immediately of any violation of MAP policy and you will be able to promptly take appropriate action. In this way, you will protect the reputation of your brand and prevent huge losses that you may incur.

      You will receive the results of data collection in the form of convenient reports in Excel format by e-mail. In the Personal Account on the service website, you can create graphs, tables and charts with statistical data.

      Tasks that require a non-standard approach are solved by developing special software.

      EXAMPLES OF MONITORING REPORTS (Link)

      What is MSRP MAP monitoring with Price Control.

      Monitoring can be performed from 1 to 24 times a day, which will be useful for tracking down the first MAP violator. Information from the Personal Account can be uploaded to Excel for further processing.

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      For more than six years, Price Control customers have trusted our solutions. We are ready to protect your reputation and preserve the value of your brands.

      Want to learn more or book a consultation with a specialist? Contact us!





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        Елена Ковалева
        Article author: CEO-specialist of the company 'Price Control'. Higher education. Studied Executive MBA at kmbs. Over 7 years of experience in e-commerce.

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