The one thing I can say about minimum advertised price (MAP) protection with total assurance is that there are a wide range of opinions on its effectiveness and even whether or not it is legally enforceable. In general, MAP Protection only relates to the advertised price and is presumed to be legal under U.S. antitrust statutes. According to the American Bar Association, “MAP policies are generally analyzed under the antitrust rule of reason. As long as a retailer remains free to sell a product at any price, the restriction on advertising is deemed to be a non-price restraint.”
I could go on about the legal challenges to MAP Protection and the several states that don’t recognize advertising restrictions, but I don’t have the space here to do that. If you want to look deeper into what’s happening with MAP policies, a good article that covers the topic is ABA’s Roadmap to Minimum Advertised Price Policies.
Having established that MAP Protection has its issues, what I really want to concentrate on is how MAP Protection is beginning to impact the aquatic segment of the pet industry. As I’ve mentioned in previous columns, our company represents only aquatic and reptile product manufacturers. What we’re seeing in our specialized area of the industry is more aquatic vendors discussing the need for MAP and implementing MAP programs.
The aquatic segment offers a lot of high end products, especially in lighting, filtration and water movement systems. These require that retailers have some knowledge and expertise with the products. These manufacturers know that selling through the internet has many advantages they don’t want to ignore, but they feel that, without brick and mortar retailers sharing product knowledge with the consumer, their brands will suffer.
I have been involved in implementing MAP programs for some of our manufacturers in the past and one of the biggest problems that come up when developing a program are a lack of an established manufacturer’s suggested retail price (MSRP). For more established companies, it is the fact that their involvement with online retailers goes back before the internet had such a big footprint in the marketplace. They find themselves in a quagmire of online discounting that, if left unaddressed, could drive brick and mortar retailers away from their brand.
We call on retail stores, detailing our manufacturer’s products to the owners and managers. In most stores, especially the larger ones with a big investment in inventory, we continually hear about how online discounting is forcing them into off-brand or MAP protected lines. We see how, in years past, major brands that are being liberally discounted on the internet and that used to dominate the aquatic retailer’s shelf are being deemphasized or, in some cases, have disappeared from the stores completely.
Those manufacturers who do implement MAP policies have several hurdles to jump—one of which is MAP enforcement. It costs money to hire a service or to have someone in-house who is dedicated to tracking the internet for MAP violations. Also, after finding noncompliance from an online store, tracking down the distributor that sold them the products can be a challenge that eats up man hours.
Ultimately, manufacturers may in the future be forced into implementing distributor exclusivity agreements, as dog food companies currently do, in order to enforce MAP pricing.
In this day and age, most manufacturers sell directly to online retailers, including Amazon. It’s hard to turn down the exposure, but with properly controlled pricing and an enforced MAP program those manufacturers can support both internet and brick and mortar retailers. I know many retailers reading this will disagree with that statement—but if you take a moment to think about it, it all revolves around pricing channels and MAP enforcement. If a manufacturer works diligently to build a firm MSRP, creates proper pricing channels and enforces MAP to the best of their ability, brick and mortar retailers will be better off and internet sales will still survive.
I think this issue is important enough to the aquatic segment’s brand health that manufacturers will figure out how to make MAP protection work. I predict that, at least as it applies to the aquatic segment, retailers will begin to see more robust MAP policies being implemented in the near future.