Page 88 - Lighting Magazine January 2020

Pricing Policies
Complicating matters further are those gray areas that no one likes to
talk about, such as white labeling and so-called “MAP Holidays.”
84 enLIGHTenment Magazine | January 2020
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When it comes to the commonly referenced MAP policy, the key word to remember is “adver- tised,” as in Minimum Advertised Price. Consumers frequently encounter ways that adhering to MAP policy is skirted when they are asked on an ecom- merce website to “add item to cart for a special price.” In those instances, the “special price” is not immediately shown for all to see — therefore, it is not technically “advertised” below MAP.
“Technically, MAP is not a restriction on the final sale price, only the advertised price,” Allen remarks. “Resellers are free to sell below MAP, but can’t advertise that fact; however, they may permit below-MAP price in the shopping cart,” he comments. “MAP can be part of an ‘agreement’ between the manufacturer and reseller on price, but it can also be unilateral.”
Allen’s advice is for manufacturers to institute a Unilateral Pricing Policy (UPP), which is also known as the “Colgate Policy” or “Unilateral Minimum Retail Price Policy” (UMRP). Unlike MAP policies where an “agreement” is spelled out, UPP does still apply to the ultimate sale price, but there is no “agreement” on price because the policy is the same across the board. According to Allen, the penalty for infringement is typically for the manu- facturer to cut off sales to resellers or distributors who violate the policy.
When manufacturers become aware of sell- ers who violate the UPP, Allen says it’s okay to publicly announce the company’s intention to no longer sell to those distributors. He recommends sending “periodic, uniformly written reminders” about the UPP and to monitor compliance, includ- ing informing sellers of violations and cutting off those who are noncompliant. Having a unilateral pricing policy avoids federal and state scrutiny
because there’s no “agreement” between parties. The word “agreement” is paramount here be- cause of the Sherman Antitrust Act of 1890, which prohibits “agreements” that “restrain trade” such as with price-fixing or collusion. Muddying the waters are the states of California, Maryland, and New York, which apparently can occasionally – on the state level – view vertical agreements on price between manufacturers and sellers as price-fixing. Again, terminology is key. Allen points out that vertical price agreements remain per se illegal in California, Maryland, and New York. “Per se ille- gal,” he says, means there is no need to show harm to competition to establish a violation; vertical agreement on price is enough. Furthermore, Allen notes there has been a big change in federal law regarding vertical price agreements. “Pre-2007, vertical price agreements are per se illegal, akin to price-fixing,” he explains, adding, “Since 2007, the
more lenient and flexible ‘rule of reason’ applies.” There are risks and challenges of RPM. Allen mentions that the RPM policies themselves may not create a basis for taking direct legal action against third-party violators. He adds that compa- nies may need to revise distribution agreements “to create basis for tortious interference and trademark claim against third parties” and that manufacturers “may need to show you are willing to take real action (including litigation) to disrupt
persistent violators.”
Complicating matters further are those gray
areas that no one likes to talk about, such as white labeling and so-called “MAP Holidays.” Pricing challenges will continue to crop up and ideally need to be addressed; however, at least under- standing the basics of these acronyms is a good start. 