Author: Molly Donovan
We recently released episode 2 of our “If I Were You” podcast. You can listen to this episode about minimum advertised prices here. Featuring Bona Law partner Steve Cernak. Or read our blog version now:
This Episode Is About: Minimum Advertised Pricing (MAP) Programs
Why: We get MAP questions from clients and prospective clients a lot.
The Five Bullets: In-house lawyers, if I were you, I would educate your business team about the following concerning MAP programs…
- Agreements with counterparties to set a minimum advertised price are risky even if you are careful to set only the minimum advertised price, and not the minimum sales price. Once you have an agreement, it’s easier for someone to argue that the agreement—even though articulated in terms of MAP—really operates, in practice, as a resale price maintenance agreement. Agreements to set a resale price are subject to state and federal antitrust scrutiny. Generally, a unilateral policy is going to be safer, i.e., there is no agreement with any counterparty that they will, in fact, adhere to a minimum advertised price.
- Assuming you have a unilateral MAP program in place, do not discuss or negotiate its terms with your business counterparties. Once you start having one-on-one discussions with counterparties that have the potential to result in variations in the terms or how the MAP program is applied on a company-by-company basis, it starts looking less unilateral and more like a bilateral agreement, which brings you back under bullet 1.
- If a counterparty wants to discuss the MAP program, they should put that conversation on hold and get you involved so that the discussions don’t go out of bounds. Steve’s special advice: Better yet to head off those situations, the MAP policy could specify that only one person, say the MAP Administrator, can make decisions on MAP issues. That can get the guys and gals out in the field off the hook.
- Sanctions for violations of the MAP program should be applied and applied consistently. You have to be prepared to implement the sanctions articulated in the program and implement them with respect to everyone. Are you really going to pull business, for example, for a MAP program violation? Steve’s special advice: Consider a series of escalating penalties for each violation similar to a “3 strikes and you’re out” rule.
- Don’t talk about the terms or implementation of your MAP program with a competitor, including at a trade association event. Once you have a conversation like that, you’re going down the road towards a Section 1 horizontal agreement to set the terms of competition. And the DOJ might say there’s an agreement even if nobody says “I agree” or “okay, we’re going to do the same thing.” The agreement can be a lot more subtle than that to raise scrutiny. So, your people need to know that if a competitor wants to talk about a MAP program, they need to get you as in-house counsel involved.