As a new e-commerce site, you must understand the dynamics behind Minimum Advertised Price or MAP pricing. There are various business and legal issues that you need to understand when running your new site to ensure everything goes on smoothly. You need to know about the various violations and the penalties they incur. Trade Vitality is specialized in this sector and can help alleviate the burden of MAP pricing and let you concentrate on growing your site. Here are some of the things you need to know.
First and foremost, you must know what MAP pricing entails. As noted above, this concept represents the minimum price that you as a reseller should advertise your products. This price is usually set by the manufacturer. You are restricted by law to only advertise particular products with the price the manufacturer issues. For instance, if a manufacturer if a blender’s MAP price is $50, you as a retailer cannot advertise it at a price lower than $50.
You Can Sell Lower than MAP Price
The MAP price only restricts you from advertising various commodities below the manufacturer issued price. The argument is that if resellers are allowed to freely advertise, the price wars would result in products losing their value. However, you can sell your products at a price lower than the MAP price. That price applies solely to advertising.
MAP Price Does not Apply to Online Shopping Carts
Online retailers have a bit of an advantage over the MAP price. The Federal Trade Commission (FTC), the agency in the US (United States) that oversees pricing issues, do not consider prices displayed on encrypted shopping carts as an advertisement. Since it is only advertisements that are subjected to the MAP price, you have a leeway with a new e-commerce site to list prices for your products below the MAP price. The price displayed is compared to the brick-and-mortar stores that show the price of their wares at their physical locations. As an online reseller, you should add a disclaimer that says “price displayed in the shopping cart” to fully comply with this law.
Penalties for Violations
There are repercussions for advertising below the MAP price. First, the manufacturer who items you advertise below the MAP price has every legal right to pull their products from your store. They can also get a court order that restricts you from selling their wares. In some other cases, you may be required to refund the manufacturer co-op funds if any, that you had received to stock their products.
Maintain Value for Brands
MAP price helps to protect the integrity and value of brands. Manufacturers try their best to maintain a consistent price, or what is known as MSRP. If retailers are allowed to advertise haphazardly, and potential clients see that they can buy a particular manufacturer’s products at prices lower than MSRP, then they resist ever buying those products at their set value leading to brand erosion. It is this scenario that manufacturers try their best to avoid.