This article is by Joe Kovacs, co-founder of Brand Guarde.
In our current economic climate, maintaining your brand value has never been more important or more challenging.
The rise of marketplaces like Amazon have made it simple for consumers and retailers alike to compare prices for your products. Traditional retailers dread the line, “I found it cheaper on Amazon”, and are quick to come and fight you for better deals to stay competitive.
I have worked with dozens of brand owners who feel like their business is spiraling out of control because of serious problems with distribution and pricing. Most of these manufacturers begin with exploring minimum advertised price (MAP) policies as a way to better control their prices online.
They quickly learn that solving the price erosion issue, especially on Amazon, is not simple. I want to share insights into some of the common questions I get about MAP pricing and important tips to help you protect your brand on Amazon.
The contents of this article are intended to convey general information only and not to provide legal advice or opinions. An attorney should be contacted for advice on specific legal issues.
What is a minimum advertised price (MAP)?
Minimum advertised price (MAP) is the lowest price that a manufacturer will allow their products to be displayed or advertised for sale. Manufacturers usually create policies detailing specific guidelines for minimum advertised price for its retailers to follow.
Why do brands have MAP policies?
The goal of establishing a MAP policy is to maintain a consistent perception of brand value to consumers and to protect profit margins for the manufacturer and its retailers.
These policies will often detail what types of discounts are allowed, where products can be advertised for sale, situations in which MAP doesn’t apply, and steps the company will take to enforce its MAP policy.
Why don’t Amazon sellers follow MAP policies?
There are a couple of reasons why Amazon sellers often don’t follow MAP price policies.
First, many sellers are reselling products on Amazon without approval from the brands they are carrying. These resellers tend to carry many different products from many different brands. Since these sellers don’t have any significant relationship or specific agreement in place with a brand, they have little concern about maintaining brand value.
The second reason has more to do with how selling on Amazon’s marketplace is structured. Earning the Buy Box is essential to making sales on Amazon. Analysis has shown between 80-90% of sales will go to the seller whose offer is currently in the Buy Box. When there are multiple resellers on a single product listing, Amazon chooses which seller is granted the Buy Box based on a variety of factors, and the lowest price is one of the most important ones.
So when you have multiple sellers all competing for the Buy Box on the same product, there is a strong incentive to lower prices. While resellers would usually rather sell products at higher margins, on Amazon they are forced to compete almost exclusively on price.
I sell directly to Amazon. Will Amazon comply with my MAP policy?
The short answer is no. Amazon knows that it holds a position of power in its relationships with brands. Most brands will not stop selling on the platform because of Amazon breaking MAP.
Amazon wants to have the cheapest prices so that consumers will continue to shop on the platform and is often willing to win the sale at all costs. They will aggressively compete with the prices of other sellers on the same listing. They will also monitor and compete with the prices of that same product on other websites like Walmart.com, Target.com etc.
Does Amazon show the MAP price on listings?
Amazon does not show the MAP price on listings. In the past, sellers were able to input the manufacturer’s suggested retail price (MSRP) when creating a product listing, which would then be displayed as a “list price” on the product page.
Usually this was done so that the list price could be struck through when the product was on sale below that price. Amazon has begun phasing out displaying list prices to reduce consumer confusion as it was often manipulated by sellers.
Will Amazon ensure that third-party sellers follow MAP?
Amazon leaves it up to brand owners to police distribution and MAP pricing on the platform.
We have helped multiple brands with MAP monitoring and enforcement on Amazon. In every case when we have tried to work with Amazon’s brand enforcement teams, we have been told that Amazon does not get involved with enforcing MAP pricing on its platform.
One of our distributors is violating MAP on Amazon. What should I do?
Cutting off access to your products is the main enforcement action you can take against sellers who violate MAP pricing on Amazon.
If you don’t already have a MAP policy in place with clear enforcement guidelines, then start the process by getting a MAP policy created by your legal counsel. Then share that policy with all of your authorized sellers to make them aware of the change. Most companies follow a three-step enforcement process in their MAP policy:
- Send a warning communication alerting the seller to the specific MAP violation with a deadline of when they need to have corrected the pricing error.
- If the seller doesn’t correct pricing by the deadline or if they break MAP a second time, then that reseller would be prevented from purchasing products for 30-60 days.
- If the seller ignores previous warnings or breaks MAP a third time, then they are permanently restricted from purchasing your products.
Protecting your brand value on Amazon is no easy task, but it is doable with the right strategy and tools. It is always better to take a proactive approach to controlling your distribution and pricing. Create a clear MAP policy to keep approved sellers in line, and establish resale policies that create a pathway to remove unauthorized sellers. Then enforce your policies consistently.
A company I don’t recognize is selling below MAP on Amazon. What can I do?
The major problem most brands have with MAP enforcement is dealing with unidentified and unauthorized sellers. Cutting off distribution to offending sellers is impossible if you can’t uncover who a seller is or how they are getting their inventory.
Many brands are left sending empty threats via Amazon’s messaging system or trying to submit infringements through Brand Registry. These methods have become increasingly ineffective as Amazon has updated its terms and messaging platform to prevent brands from using their tools in this way. This is why we encourage brands to take a different approach to policing unauthorized sellers on Amazon who are breaking MAP.
First, identifying sellers has become a little easier since Amazon began releasing seller address information on the platform in early September 2020. If you navigate directly to the seller’s profile page you will find their entity name and the address associated with the account.
Cross-check this information with your sales records to help cut off distribution to the offending seller. You can also use it to contact sellers directly, which is typically more effective than using Amazon’s communication tools. However, it is important to have a sound legal strategy behind your removal efforts that goes beyond just MAP enforcement.
Most resellers rely on a principle called the first-sale doctrine, which essentially states that once a product is legally purchased, the new owner has the right to sell that product to whomever they wish. This part of copyright and trademark law was created long before the rise of ecommerce and marketplaces like Amazon. Over the last 10-15 years, the courts have established several notable exceptions to the first-sale doctrine that give more power to brands to protect distribution.
The material difference exception is one of the biggest legal pathways brands can pursue to protect against unauthorized sellers causing price erosion. A material difference means that there is some sort of noticeable variation between the product sold to a consumer, and the same product when it was sent out by the manufacturer.
The difference must be to such an extent that it will create “consumer confusion” as to the source or brand of the product. These differences can be physical (lack of manufacturer packaging) or non-physical (warranty, quality control standards, customer service support). Therefore, an Amazon merchant can sell products that are authentic but still materially different to the products sold by the manufacturer, and may be liable for intellectual property infringement because their products will not be considered genuine under the law.
Companies can establish these material differences by creating reseller policies and agreements that clearly establish criteria and expectations around quality control standards, customer support, product recall procedures and applicability of consumer warranties.
Then communication with unwanted resellers can center around potential trademark infringement and material differences, instead of not following pricing guidelines. We have found this strategy to be very effective in removing unwanted resellers.
How can I enforce my MAP pricing policy on Amazon?
Sellers breaking MAP generally fall into two groups: authorized sellers or unauthorized sellers.
Unauthorized sellers are much more likely to break MAP, which then leads to authorized sellers becoming frustrated and decreasing their own prices to compete for the Buy Box on Amazon.
For unknown, unauthorized sellers we have found that sending cease and desist communication based on material difference and trademark infringement claims (see above) to be quite effective.
Since you have an established relationship with authorized sellers, they are often much more cooperative when asked to fix pricing issues. For known sellers that refuse to comply, the main way to enforce MAP is to restrict distribution to that particular reseller so they cannot restock.
How can I prevent MAP violations on Amazon?
Preventing MAP violations on Amazon can be difficult given how easy it is for resellers to list products on the marketplace. Two strategies that can be effective are:
- Controlling the number of resellers.
- Setting wholesale prices that don’t leave enough margin to undercut your MAP pricing on Amazon.
Limiting the number of sellers authorized to sell on Amazon is the most important step to protecting margins on the platform. Using tools to vet wholesale applications, like my company’s seller database Seller Certify, can help prevent product diversion. In addition, having a clear enforcement plan to remove unauthorized sellers will help keep prices in check.
MAP violations can often come down to a numbers game. Online sellers are in search of profit margin. While they usually have very little overhead, they do have to contend with Amazon’s selling fees which can be 30%+ of the sale when accounting for advertising and FBA charges. Limiting large discounts and promotions will be instrumental in not allowing sellers to have an attractive margin when selling below MAP.
Does Brand Registry protect me against MAP violations?
Brand Registry was primarily built to protect brand owners against counterfeit sellers infringing on their copyrights, trademarks, and patents. If counterfeit sellers are causing price erosion then Brand Registry can be an effective tool to protect pricing.
However, if the MAP violations are coming from sellers with your authentic products then Brand Registry will not be very helpful. Brand Registry violations mentioning MAP pricing violations will get rejected, often stating that it is the brand’s responsibility to police their distribution, not Amazon’s.
Are MAP policies legal in the US and Europe?
MAP policies are legal in the US as long as they only govern advertised prices and not actual selling prices. A retailer can offer a cheaper price in store or once a product is added to an online shopping cart, as long as the advertised price isn’t below the agreed MAP level.
In Europe and the UK, MAP policies are illegal based on competition laws that are more favorable towards retailers and resellers than brands. Competition laws stipulate that there be free pricing by everyone competing in a market. Pricing is taken out of the control of manufacturers and is set by the free market. Manufacturers caught trying to set and enforce MAP pricing in the EU can face stiff fines and penalties.
This article was by Joe Kovacs, co-founder of Brand Guarde, an agency specializing in helping companies solve challenges with unauthorized resellers, MAP compliance and distribution control on third-party marketplaces like Amazon.
Brand Guarde has also developed Seller Insight, a MAP monitoring and seller tracking tool to help companies better manage their pricing on Amazon.