MAP pricing: what minimum advertised price means for makers

What MAP pricing means

MAP stands for minimum advertised price. A brand that sells wholesale to shops, stockists and online retailers sets a floor for the price those retailers may advertise. The floor covers the price shown in ads, emails, product listings and price comparison feeds, depending on how the brand writes its policy. It does not set the price the retailer charges at checkout.

For a maker, MAP pricing answers a practical problem. You sell a candle to ten stockists. One of them starts advertising it far below the price everyone else shows. The others see their margin squeezed, and some stop reordering. A MAP policy tells every stockist, in writing, the lowest price they may advertise, and what you will do if they go under it.

In the approach the FTC describes as lawful, MAP is a policy the brand sets and enforces on its own. Stockists do not agree on it among themselves, and that difference matters for the law, as the sections below explain.

MAP vs MSRP: what each price controls

Makers who sell wholesale usually publish two prices to stockists, and often a third. The table sets out what each one is, who sets it and whether a retailer is bound by it.

MSRP is a suggestion. MAP is a rule about advertising, with a consequence you choose. A brand can set MAP equal to MSRP, so stockists may only advertise the suggested price, or set it below MSRP to leave room for advertised sales.

The FTC answers the MSRP question directly: A dealer is free to set the retail price of the products it sells. It adds that the manufacturer can decide not to use distributors that do not adhere to its MSRP.

Where US law draws the lines on a MAP pricing policy

The FTC's guide to manufacturer-imposed requirements sets out the federal position. In 2007, the Supreme Court held that price programs a manufacturer sets for its dealers are judged by a rule of reason approach. The FTC explains that such programs can increase competition between brands while reducing competition among dealers of one brand, and that these benefits must be weighed against any reduction in competition from the restrictions.

Inside that standard, the FTC draws one line above all others: the difference between a unilateral decision to impose a restraint (lawful) and a collective agreement among competitors to do the same (unlawful).

• A brand may announce a price policy on its own. If it does, the law allows the manufacturer to deal only with retailers who agree to that policy.
• A brand may enforce it by walking away: it may stop dealing with a retailer that does not follow its resale price policy, and it can offer the policy on a "take it or leave it" basis.
• Competitors must price on their own, which means manufacturers cannot agree on wholesale prices, and dealers cannot agree on retail prices.
• A manufacturer can listen to its dealers and take action on its own in response to what it learns from them. The FTC adds a warning: Legal issues may arise if it appears that the dealers have agreed to threaten a boycott or collectively pressure the manufacturer to take action.
• Federal law is only part of the picture: some state antitrust laws and international authorities view minimum price rules as illegal, per se.

Rules vary by state, and a policy that is fine under federal law can still raise questions under a state's antitrust law. This page is general information, not legal advice. If you plan to enforce a MAP policy against stockists, ask a lawyer who knows the states you sell in.

How a MAP pricing policy works, step by step

A MAP policy is a short document you send to every stockist. These steps follow the unilateral approach the FTC describes, where you set the policy and each stockist decides whether to keep buying from you.

1. Set your prices first

   Decide your wholesale price and your suggested retail price. MAP can sit at the suggested price or a little below it. Work out what margin a stockist keeps at the MAP price, because a floor that leaves them no margin is hard to hold.

2. Say what counts as advertising

   Name the places the floor applies: product pages, emails, social posts, paid ads, comparison feeds. Say what does not count, such as the price in a shopping cart or a price given to a customer who asks.

3. Say what happens if a stockist goes under it

   State the consequence plainly, for example that you will pause wholesale orders. The FTC says a manufacturer may stop dealing with a retailer that does not follow its resale price policy. Keep the consequence in proportion to the breach.

4. Send it to every stockist the same way

   Publish one policy and send it to all stockists. Do not negotiate a separate price deal with each one, and do not ask stockists to agree with each other on prices, because manufacturers cannot agree on wholesale prices, and dealers cannot agree on retail prices.

5. Enforce it on your own

   When a stockist reports a competitor's low advertised price, check it yourself and decide yourself. The FTC says a manufacturer can listen to its dealers and take action on its own in response to what it learns from them. Do not let a group of stockists decide for you. The FTC notes: Legal issues may arise if it appears that the dealers have agreed to threaten a boycott or collectively pressure the manufacturer to take action.

6. Review it once a year

   Prices, costs and stockists change. Re-read the policy, adjust the floor and send the new version to everyone at the same time.

When a minimum advertised price policy goes too far

The FTC describes one case where MAP policies crossed the line. It challenged the policies of five large distributors of pre-recorded music because they were unreasonable in their reach. The FTC found three problems:

• First, they prohibited ads with discounted prices, even if the retailer paid for the ads with its own money.
• Second, they applied to in-store advertising.
• Third, a single breach meant the retailer had to forfeit funds for all of its stores for up to 90 days.

The policies covered more than 85 percent of market sales, and the FTC found they stopped retailers from telling shoppers about discounts. The same FTC guide also says The law allows a manufacturer considerable leeway in setting the terms for advertising that it helps to pay for. The FTC calls the music case one of the limited situations where such programs went too far, so a MAP rule tied to ad money you pay for is on firmer ground than a ban on any discount anywhere.

Advertising a price against MSRP: the FTC pricing guides

MAP pricing is about the floor. The FTC's Guides Against Deceptive Pricing, in 16 CFR Part 233, are about the comparison: what a seller may claim when it shows a price next to a list price or a former price.

The guides start from how shoppers read a suggested price. Many believe a suggested retail price is the price at which an article is generally sold. So an ad that says "was the suggested price, now less" implies a real saving, and that saving has to be true.

• For a maker: the guides say a manufacturer selling on a large regional or national scale cannot be expected to police every local price, and look at whether its list price was set in good faith (i.e., as an honest estimate of the actual retail price). Do not print a high MSRP on the tag just so stockists can show a large discount.
• For a stockist: before advertising a reduction from your MSRP, the retailer should ascertain whether the list price is in fact the price regularly charged by principal outlets in his area.
• A list price is not fictitious if it is the price at which substantial (that is, not isolated or insignificant) sales are made in the advertiser's trade area.
• For your own shop: a "was" price should be the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time.

For a maker selling through stockists, this means your MSRP should be a price that shops really charge. If most stockists sell well below it, advertising discounts against it can mislead shoppers.

Example: MAP pricing for a candle sold through stockists

Example, with assumed numbers: a maker sells a candle to stockists at a $12 wholesale price and suggests a $24 retail price. She sets MAP at $22, so stockists may advertise a modest sale but not a deep cut.

One online stockist lists the candle at $15 on its product page. Under her policy, that is advertising below MAP. She writes to the stockist, points to the policy all stockists received, and pauses new wholesale orders until the listing is back at or above $22.

A shop that sells the candle for $18 at its counter, with no ad or listing showing that price, has not broken a minimum advertised price policy. The selling price is the shop's decision.

Where Nation fits

Questions about MAP pricing