[Originally published in the Fall 2015 issue of the Federal Bar Association/Orange County Chapter Newsletter. See the original article here.]
A growing number of manufacturers and wholesalers are using minimum advertised pricing (“MAP”) policies to control how retailers showcase the price of their goods. Whether the products are smartphones, luxury handbags, or golf clubs, manufacturers use MAP policies to protect brand integrity, to encourage retail investment in product display, customer service, and sales, and to avoid the ever-present “free-rider” problem that results when retailers who do not expend resources on brand promotion take advantage of those who do by out-pricing them. In contrast with a resale price maintenance (“RPM”) policy, which controls downstream pricing, a MAP policy places restrictions on the price at which downstream retailers display prices in fliers, store windows – and with increasing importance, on their websites. A thoughtfully drafted—and consistently enforced—MAP policy may avoid some of the antitrust pitfalls in state and federal law that would otherwise apply to agreements on price.