More about what manufactures donít want you to know Ė MAP Pricing

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    More about what manufactures donít want you to know Ė MAP Pricing

    Minimum advertised price - MAP
    Wikipedia does a good job of defining the Term. So I start with what they have to sayÖ.

    Main article: resale price maintenance
    Minimum advertised price or MAP (also known as resale price maintenance, or RPM) is the practice of a manufacturer providing marketing funds to a retailer contingent on the retailer advertising an end customer price at or above a specified level. Such agreements can be illegal in some countries when members and terms in the agreement match predefined legal criteria.

    Fixed pricing established between a distributor and seller or between two or more sellers may violate antitrust laws in the United States.
    In Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705 (2007), the Supreme Court considered whether federal antitrust law established a per se ban on minimum resale price agreements and, instead, allow resale price maintenance agreements to be judged by the rule of reason, the usual standard applied to determine if there is a violation of section 1 of the Sherman Act. In holding that vertical price restraints should be judged by the rule of reason, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).

    Because the rule of reason applies, minimum RPM agreements may still be unlawful.

    In fact, in Leegin, the Court identified at least two ways in which a purely vertical minimum RPM agreement might be illegal. First, ď[a] dominant retailer ... might request resale price maintenance to forestall innovation in distribution that decreases costs. A manufacturer might consider it has little choice but to accommodate the retailer's demands for vertical price restraints if the manufacturer believes it needs access to the retailer's distribution network." Second, ď[a] manufacturer with market power ... might use resale price maintenance to give retailers an incentive not to sell the products of smaller rivals or new entrants.Ē

    In both of these examples, an economically powerful firm uses the RPM agreement to exclude or raise entry barriers for its competition.

    In addition, federal law is not the only source of antitrust claims as almost all of the states have their own antitrust laws. Leegin dealt only with a claim arising under Section 1 of the Sherman Act.

    In the UK in September 2010 an investigation was launched by the Office of Fair Trading into breaches of competition law by online travel agents and the hotel industry in relation to the advertised pricing of hotel rooms. As of April 2011 this was an administrative priority of the OFT.

    End Wikipedia

    A number of articles have been written on the subject. There are two sides to MAP policy.

    Manufactures who impose the policy are obviously for it. Most retailers oppose the policy because it restricts competition and as a matter of principal, most Americans donít like being told what they can and canít do.

    MAP only serves to artificially keep prices high. This hurts the consumer in a poor economy. Manufactures donít seem to get it.

    They would sell more if they let a free market arrive a fair price based on actual supply and demand.

    Iím trying my best to hold prices down for my customers. Manufactures are raising prices.

    Since they donít have the ability to meet current demand, high prices help them to manipulate the market with less supply.

    Here is an article you might find interesting.

    November 2008 - How the Supreme Court Fractured Online Pricing - Internet Retailer

    Here is another.

    MAP Pricing

    The third article is an approach to the problem I like best. It is a way to work within the system as it is.

    Merchants find a way around MAP (Minimum Advertised Price)

    More from me latter if there is any interest in this topic.
    If you understand, things are just as they are... If you do not understand, things are just as they are....
    - Zen Saying

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