There are ways around the imposed MAP of a manufacturer.
Offering a lower price for a restricted group (not general
public) such as sworn police & peace officers or restricting
sales to "over the counter" where a federal F4473 must be
filed. Bundling of the item with one or several other items,
such as "a free weapon light and mount" or "a free Covert
Ballistic Nylon Carrying Case" is another way to promote a
"better deal".
More and more of the manufacturers we represent have L.E.
Distributor's agreements, where any advertising MUST exclaim
that "products are for exclusive sale to Qualified LE
officers presenting proper credentials at point of purchase
only."
There seems to be lots of interest these days among business
people in “MAP” (minimum advertised price) programs. The
resurgence in interest has much to do with the rise of
internet discounters. However, the volume of legal authority
addressing MAP programs is not yet commensurate with their
significance in the economy. This thin body of authority
translates into uncertainty on some key issues.
MAP is a supplier’s policy that its channel members are not
permitted to advertise prices below some specified amount
(the minimum advertised price). The supplier may or may not
have a policy about the channel member’s retail price as
well. Such resale price policies present separate but
closely related legal issues and are frequently dangerous
from an antitrust perspective.
MAP programs are often incorporated into the supplier’s
cooperative advertising policy. The policy typically
provides for the channel member’s expenses to be reimbursed,
its ads cannot contain an advertised price (if any) lower
than that specified by the supplier.
Some of the early court decisions on MAP or other price
advertising restrictions viewed them as just another form of
minimum resale price control, automatically unlawful under
antitrust law. Other decisions upheld programs that would
not reimburse for ads including resale prices below the MAP
level, but did allow channel members to advertise any price
as long as they paid for that advertising themselves.
Through most of the ‘80s, the Federal Trade Commission took
a hostile view toward MAP, even when incorporated into co-op
programs. But in 1987, it reversed its course, stating that
they are not automatically unlawful where they do not
attempt to control the channel member’s right to actually
sell products below MAP.
Beyond that, things get more complex. The FTC has challenged
widespread practices in the CD distribution business that
went well beyond traditional co-op programs. These
conditioned retailer reimbursement not only on adhering to
MAP prices in media subject to the co-op program, but also
in connection with advertisements paid for by the retailers
themselves, including in-store signage. The FTC thought that
went too far. It entered into consent orders with the five
leading CD distributors that, among other things, prohibited
the distributors from implementing any co-op program
contingent on ultimate sale prices or basing co-op payments
on the prices in advertising paid for entirely by the
channel member.
The FTC used these consent orders to send a message to other
suppliers. It indicated that it would “view with great
skepticism cooperative advertising programs that effectively
eliminate the ability of dealers to sell product at a
discount.” The legality of MAP outside of co-op programs
remains uncertain and dependent on the actual effects of the
program.
As a follow-on to the consent orders, 43 state attorneys
general sued the distributors for consumer damages for
illegal resale price control. The distributors settled those
suits in December 2003 by paying $143 million.
The internet is the new frontier for MAP programs. One
unique issue that has arisen is how the relatively safe
harbor of co-op programs applies to internet retailing. To
what extent does a co-op program actually pay for a website?
Can a co-op program apply to some pages of a website but not
others? Does it matter what or where those pages are? For
example, can it prohibit below-MAP prices on the first
several web pages a shopper would see when it accesses the
website as long as it permits any price to be advertised
elsewhere in the website? If the retailer is nothing but an
internet seller, can the supplier prohibit advertising below
MAP prices altogether?
There are no court decisions or FTC pronouncements to date
that directly address any of these internet issues. We all,
Distributors, dealers, lawyers and customers alike, eagerly
await such solid authority. Such uncertainty generates a
dilemma all business people would prefer to avoid: being too
conservative results in less-than-optimal business
practices; being too aggressive results in considerable
legal risk.
In order for us to stay competitive, we too have to play the
game.
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