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Minimum Advertised Price Policy Enforcement for Manufacturers

Hand sketching value price puzzle conceptRetailers don’t have a free hand in deciding the price they can advertise for different products, as manufacturers implement minimum advertised price (MAP) policies. Authorized distributors or retailers are supposed to follow these policies or they'll pay the price for their policy violations.

Why manufacturers impose MAPs

When a customer needs to buy something, one of the most important factors that help them determine a purchase is pricing. They will look at the lowest prices. This is why e-commerce sites even provide an option to display products based not only on search relevance, but also on lowest-to-highest prices.

Manufacturers need to control how low their distributors and retailers can go as far as the prices they advertise online or offline are concerned. This will prevent retailers from relying on price wars alone to sell their products.

Authorized vs. Unauthorized retailers

Authorized retailers are more likely to abide by a manufacturer’s MAP policy enforcement, as they have more to gain for doing so. The policy is less likely to be effective with unauthorized distributors, on the other hand, as the manufacturer has no way to enforce the policy with a party it does not have a binding agreement with.

A study shows that 15% of authorized retailers violate MAPs, but that figure is dwarfed by the 53% of unauthorized retailers doing the same.

What manufacturers can do

Manufacturers can exercise control over how retailers price their products, but this is only effective with authorized retailers. Violators can receive a firm reprimand, which serves as a warning the first time they violate the MAP policy.

Those who violate the policy another time may receive a suspension of two months, during which they will not receive supplies from the manufacturer. The third time they violate the MAP policy, the manufacturer can suspend their supply for six months to a year. The fourth time the same retailer ignores the MAP, the manufacturer should be able to terminate the agreement with the retailer.

It's best to be aware of such a system if manufacturers are to enforce their MAP policies properly.

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