What Is Minimum Advertised Price?

Minimum Advertised Price is an agreement between suppliers and retailers stipulating the lowest price an item is allowed to be advertised at. If you’ve ever tried to shop around and keep nosing up against the same number, you may have just discovered that good’s MAP. This is why sometimes you see signs that say “price too low to advertise!” Or why when shopping online, sometimes the price doesn’t show up until further in the transaction process. Retailers can incur sizable fines and/or penalties from their suppliers for violating MAP contracts.

MAPs skirt closely to price-fixing, which was, up until recently, illegal.

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(Photo: Ben Popken)

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  1. internal says:

    So, what’s the term for when an item is the same price where ever you go and is never on sale, like iPods or Bose speaker systems? (other than ‘sucker’ or ‘screwed’…)

  2. jollymonjeff says:

    Also keep in mind that some manufacturers will not allow you to sell below a minimum price, such as Bose. You will never see Bose products discounted. Manufacturers also may prohibit coupons, which is one reason you may see exclusions of certain brands on coupons from stores like Macys or Lord & Taylor.

  3. Sidecutter says:

    Legalized price-fixing. Just another way for your legislators to allow big companies to circumvent laws.

  4. Steel_Pelican says:

    MAP is a huge problem in the musical instrument business. For example, the MAP for a Gibson Les Paul is usually about $3000+, depending on the model. But the going rate is usually more like $2000 (like cars, guitar prices are usually negotiable). But MAP agreements often apply to more than just advertisements and webpages, they often even apply to the price tag that hangs on the guitar in the store.

    This does all sorts of screwy things to the market, and it’s usually us poor musicians who suffer.

  5. Xerloq says:

    @Sidecutter: I wouldn’t say legislators, per se, are the cause. I recall my retail days, selling electronics. Bose didn’t have a contract spelling out pricing, they would simply pull their wares from stores who sold below the MAP. Consumers kicked the ball of legality around for a while, but more and more companies started doing it.

    Back to Bose; the commission on Bose was horrible, because the margins were so small. Instead, we got spiff payments at the end of the month (one for me, one for my manager, one for the store). This also ensured we wouldn’t sell below the MAP, because we wouldn’t sell at a loss.

    You don’t need contracts or laws to require a MAP, just thin margins, no volume discounts and a handicapped distribution channel.

  6. cef21 says:

    Let’s be careful here. There are two types of price maintenance: horizontal, where competitors jointly set their resale prices; and vertical, where a manufacturer dictates prices to its retailers.

    Horizontal Price Maintenance (what we normally call “Price Fixing”) is still illegal. The Supreme Court just said that vertical price maintenance is not automatically illegal. They did not say that it’s automatically legal. The difference is important, because it means that at least some of the time, it’s still illegal for a manufacturer to dictate prices to its resellers. The problem, though, is that the Supreme Court didn’t say when that is.

    In general, though, remember that manufacturers want their retailers to sell at low prices. The lower the retail prices, the more items are sold, and the more the manufacturer sells.

  7. abigsmurf says:

    wow, this kind of thing is really illegal in the UK. There was a huge storm over RRPs (recommended retail prices) a decade or so back and as a result it’s illegal to enforce RRPs

  8. logie-al says:

    MAP pricing is in place to help the small retail stores compete. I run a small retail business that deals with various lines of sporting and recreational goods. Without MAP pricing, something that my wholesale cost on is say, $20 and my MAP is $30, then I don’t have to worry about Wal-mart coming along and selling the same item for $25. It fosters competition among retailers to lure customers in with service and environment, not price. If I am forced to compete with any of the big box retailers or even the internet (the worst for my bottom line), then my customers loose because I am forced to cut costs somewhere else to make up what I am loosing due to someone else selling it cheaper.
    While I don’t always agree with the level of MAP that the manufacturer sets, MAP programs are more beneficial to the consumer than a free-for-all type.
    I would take on any of the big box stores any day with service, but I know I would get my @$$ handed to me if I tried to compete with price.

  9. phonocamptic says:

    Here’s the deal. I used to work for an independent music retailer.

    MAP price in the musical instrument business was not created to price fix. It was created to prevent distributors with deep pockets from selling products to the end consumer, at a price that was lower than an independent retailer.

    This policy was the music manufacturers attempt to keep their “mom and pop” stores in business, after years of faithful patronage.

    It was also put in place to make sure that the customer had to actually contact someone directly to get a deal, because the manufacturer’s want the consumers to be educated about what they are purchasing from people that were trained on their products.

    In reference to an earlier comment MAP pricing can be used to restrict posted pricing in any and/or all(but not limited to) of the following situations:

    In-store flyers, price tags, circular ads, internet ads, radio ads, fax promotions, and in some cases on phone calls.

    Retailers are allowed to sell products for less than MAP, but they are not allowed to advertise.

    In a nutshell, they want the dealers to work for their money, and they also want to make sure that consumers do not get overcharged for equivalent goods.

    Remember, it is up to you to be an educated consumer, because no matter what business you are in, people will take advantage of your lack of experience.

  10. phrygian says:

    @logie-al: They don’t always help a small retailer: [cbs11tv.com]

  11. Trai_Dep says:

    It’s important to note that retailers *can* sell for whatever they want, or even advertise if they so choose. However, if they do the latter, then they lose co-marketing funds that the mfr shares with the retailer. Of course, these funds are designed to be generous enough to make a retailer think twice about it, but the freedom’s there.

  12. randombob says:

    I see both sides of the argument. I worked in an automotive aftermarket retailer and MAP was very prevalent. From that perspective, LOGIE-AL is correct: it allows smaller “mom-and-pop” stores to compete, as the price is more or less the same across all authorized retailers, so you’re competing on service level & more than anything, return policies. On this side of the argument, it’s good for consumers because it keeps the retail market from becoming a Monopoly or Duopoly, with only Wal-Mart selling the goods. We all know what happens when there’s no competition, right? If only Wal-Mart’s left, do you really think they’ll still have a little yellow happy face flying around cutting prices? Nope. They’ll have a little yellow happy face flying around jacking prices sky-high.

    On the other hand… They aren’t really doing it for the consumers. What happens is the manufacturer, when it was in it’s infancy, was at the mercy of the retailers for shelf space & advertisement by word of mouth. Once the brand becomes well-known, the tables turn and the manufacturer will start to dictate prices to the retailer who has to sell their product to be viable in the market.

    Here’s the real reason: The manufacturer isn’t trying to protect consumers, they’re trying to keep margins high at the retail level so that it doesn’t have to cut pricing deals at the wholesale market. without MAP, the brand becomes “diluted” and “Devalued” as pricing wars set the consumer up to believe that product xyz that the manufacturer would like to see sold for $100 is actually only worth $79.99, the price they see marketed almost universally. So the manufacturer isn’t on the side of the little guy, trying to foster competition, he’s trying to squeeze you for all you got, keeping their margins high by enforcing margins at the retail level.

    And in THAT vein, it’s bad for consumers, because it keeps competition from bringing prices down, something free markets are supposed to do. This creates artificially high price points for junk merchandise, and there’s little innovation, more effort is thrown into brand management, as they try to show you that indeed their $100 pair of sunglasses that they manufactured for $4 is totally worth it.

    It’s quite a conundrum, really. We need to keep competition, but it leads to megalomaniacal monopolies, yet trying to keep prices “fair” and foster competition limits consumer power. what do you do? It’s one of the underlying problems with free market economics, I firmly believe.

  13. randombob says:

    @trai_dep:
    yeah not sure about that. In fact, I know it’s wrong. The ultimate is that they pull your pricing out from underneath you so you can’t actually sell & compete. Imagine that you don’t adhere to MAP, then suddenly SONY sells you at wholesale pricing a product that retails for the same amount. You will LOSE MONEY selling it, and thus you have to lose money to look like you even are competitive in the market.

    The manufacturers, if they are powerful enough and play it right, can run retailers who break MAP right out of business. it’s not simply lost co-advertisement bonuses, it’s the right to exist.

  14. Geekybiker says:

    @trai_dep: Didn’t the court just recently rule that it is legal to enforce MAP? IE you’re violating the term of contract with the manufacturer. Of course if you’re selling gray market with no contract you’re free to do what you like.

  15. Esquire99 says:

    I used to work for a major electronics manufacturer who had MAP policies in place. The company I worked for dealt almost exclusively through “Authorized Dealers”. Once of the clauses in the dealer agreement is they adhere to MAP and MRP (Minimum Retail pricing) on certain products. If they don’t adhere, they get a few nasty letters, etc. and eventually, if they still refuse to comply, the simply lose their dealer agreement. Then they have to go to one of a very small group of “distributors” and pay more for the product. Once they start buying from a distributor, they are not subject to MAP or MRP, but the margins are so thin, they are basically forced to do so anyway.

  16. awall25 says:

    I got kicked off of ebay for selling products below MAP. I never determined if what the companies did to me was actually legal or not, but either way, it sucks. Actually the biggest problem was with a company whose MAP policy I was adhering to. They said I was infringing on their trademark by using their name, since I wasn’t signed on as an authorized distributor.

    The only people the MAP policy helps is the manufacturer. It allows them to keep their wholesale pricing artificially high.

    @trai_dep:
    Actually many companies will outright sue you for breaking MAP. A lot of companies don’t provide any reason to adhere to MAP except that they will sue you. I found this especially prevalent in the health goods appliances industry.

  17. phonocamptic says:

    I don’t know if you all realize, but the concept of MAP pricing in the musical instrument retail business was basically implemented at the request of a multitude of independent retailers on the verge of going out of businesss due to large wholesalers dumping product in the hopes of making money through a large quantity of sales.

    The margin for the retailer varies with manufacturer, and has basically been figured out by various companies by assessing the margin that dealers were making prior to the introduction of MAP policies in this business.

    I know for the fact that the dealer discounts relative to list price have not changed at all. The discount for the retailer is still the same.

    Don’t forget that if no one makes money, then the company goes out of business, and then you will have no product to play with at all.

    The largest example of an industry destroyed by the lack of MAP enforcement is the DJ market.

    You may notice that mostly large chains, and distributors are selling turntables and mixers. This is because all of the DJ companies had been selling their products to the “deeper pockets” in the industry for such a huge discount, just to move large quantities of product. That an end-consumer could purchase a turntable for 10-25% less than an independent could buy them. Who would stock one after this!!

    As for the Gibson guitar comment, I have sold Gibsons to people all over the world, and my store purchased easily over 500,000 in dealer cost of Gibson product annually, and their discounts have not changed in the past 8 years.

    The system implemented like most is not perfect, but that’s life.

    Just remember, you can always pay less than MAP price on anything, because when it comes down to it, they want the sale.

  18. KingJoe says:

    @ AWALL25: It was NOT legal. Their TM claims were bogus, as was any claim that you need to follow a MAP you didn’t sign.

    It’s a case of a big company bullying you with the law because they know they can. If you would’ve fought it, it would’ve been kicked out of court, possibly been deemed frivolous.

  19. awall25 says:

    @KingJoe:
    I figured that it wasn’t, but I didn’t know how to take them to court or really have the capabilities at the time.

    I called them fairly recently, considering all of this happened about 2 years ago in a last ditch effort to get my ebay account back up, but they weren’t willing to reconsider.

    Maybe I should take them to court.

  20. hapless says:

    @logie-al:

    I’d be perfectly happy to see Wal-Mart hand your ass to you.

  21. That photo is actually kinda creepy. A good photo but still creepy. It’s like those shots of a doctor hovering over you while you’re lying on a table.