Many brands today understand the importance of enforcing MAP on Amazon – but they struggle with the execution of the strategies needed to succeed.

In today’s post, we are going to share with you several effective strategies that you can use to enforce MAP and eliminate unauthorized sellers on Amazon.

But first, in case you aren’t yet familiar with why MAP violations on Amazon are so destructive, here’s a simple formula to explain to brands why maintaining MAP on Amazon is so important:

1. When MAP is broken, brick & mortar partners will complain and potentially start dropping your product line.
2. When that happens, your main distribution channel becomes Amazon.
3. If most of your sales are on Amazon, you’ll attract more 3P sellers, and they will race to the bottom, and/or Amazon will start buying from you and they will price the lowest of all.
4. If Amazon starts buying from you and they are your main source of distribution, they are going to start asking for bigger discounts, more co-op budget, etc… and everything they ask for (demand) is going to decrease your profit margin.

Conclusion: If you fail to effectively enforce your MAP policy, you will eventually destroy your brand’s profit margin – and maybe the entire company.

How to Enforce MAP on Amazon

The good news is that there are effective ways to enforce MAP on Amazon.

Create reseller policies that clearly outline your rules – and the consequences of not following your rules. To avoid potential anti-trust litigation and other liabilities, roll out these reseller policies unilaterally so they are not contracts between the brand and the reseller. Require distributors and resellers to sign that they have received their reseller policy.

Create and enforce policies related to MAP. As with the point above, these need to be unilateral policies, not contracts. Enforcement is the critical piece that will show distributors and retailers that you are paying attention. If you catch a reseller breaking the rules and decide to drop them, make sure words gets out so everyone else knows you are serious.

Where realistic, offer manufacturer warranties with your products. Make these warranties only available on products purchased through authorized resellers. List these resellers on your website. Trademark attorneys have told us that the authorized seller’s warranty versus the unauthorized sellers lack of a warranty does, in fact, constitute a material difference in the product – and a material difference is an infringement on your trademark that Amazon will act on.

Gate your brand on Amazon. Amazon will gate product listings if a brand can demonstrate that there are customer safety issues that exist if the product is purchased from anyone other than the authorized resellers. For ingestible products, it isn’t overly difficult to convince Amazon that you can’t guarantee safety to Amazon customers for products purchased from grey-market sellers.

Consider putting serial numbers or batch numbers on your products. Tie these numbers back to specific distributors/retailers so that when you do a test buy from an unauthorized reseller, you can easily identify the source of the product – making it far easier to take action and close the leak. Furthermore, if a grey-market seller chooses to remove the serial numbers or batch numbers, this qualifies as a material alteration of your product, and likely constitutes infringement.

Reduce Authorized Sellers to No More Than Two

Once you have the correct legal foundation in place, you may also want to consider reducing the number of authorized sellers for your products on Amazon, as doing so will provide some significant benefits to your brand.

And finally, if you do decide to reduce the number of authorized sellers, be sure to only work with professional 3P sellers who will add value to your brand – value beyond just selling your products.

About Inovtech Services

Inovtech Services is a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them – thereby ensuring that our interests are 100% aligned with yours.

Manufacturers implement minimum advertised price (MAP) policies to control the prices at which retailers can advertise their products.

MAP policies are often thought of as memorializing agreements between manufacturers and authorized retailers regarding the lowest prices at which the retailers are permitted to advertise the manufacturers’ products.  However, they are merely policies, not actual agreements.

Nonetheless, MAP policies are often necessary for companies, as shoppers generally look for the lowest-priced goods, including for e-retail sales. And many e-commerce websites display products from lowest-to-highest price.

Of course, MAP policies are not binding on unauthorized retailers. Thus, unauthorized sellers are more likely to violate MAP policies than authorized retailers.

In fact, a recent study revealed 53 percent of unauthorized retailers violate MAP policies. This is in contrast to 15 percent of authorized retailers.

Ayelet Israeli (now a Harvard Business School assistant professor of business administration) and Eric Anderson and Anne Coughlan (Kellogg School of Management marketing professors) also noted that authorized retailers are less likely to violate MAP policies because they have the most to gain by complying with manufacturers’ pricing.

For instance, a manufacturer that becomes aware of an authorized retailer violating its MAP policy, can stop supplying products. Without products, the authorized retailers obviously cannot make money – the whole point of becoming an authorized distributor.

Enforcement

If manufacturers are serious about enforcement (and want to be taken seriously), they must have—and clearly communicate to authorized retailers—policies for addressing MAP violations. Specifically, they must have a system for penalizing or punishing their authorized retailers.

For example, a manufacturer might let an initial MAP policy violator off with a warning – albeit a stern warning that it can legitimately back up with action if necessary.

Subsequent violations, however, can result in suspensions, which should increase in severity.

Manufacturers might suspend authorized retailers for 60 days for their second violation, for example. Third violations could result in six- or 12-month suspensions. After fourth violations, the manufacturers should probably terminate the authorized retailers.

It is critical that manufacturers try to create a deterrent effect and cut off the offenders completely if necessary. Otherwise, they will struggle to stop the authorized distributors and, in turn, lose control of their pricing and brands.

Of course, unauthorized retailers have a higher propensity of violating MAP policies and their pricing violations put pressure on authorized retailers to compete on price. In other words, they pose a greater threat to companies.

Thus, while it is important to take action against authorized retailers, it is arguably more critical to address unauthorized retailers.

Certainly, a company cannot actually enforce its MAP policy against unauthorized retailers, as those sellers are not under any contractual obligation. But a manufacturer can still take enforcement actions against them for engaging in unauthorized sales (e.g. violating the manufacturers’ trademark rights).

Obviously, companies should focus their enforcement efforts on the most serious offenders and then work their way down.

That is not to say that they should ignore one-off sellers. But manufacturers must be smart and prioritize their enforcement efforts.

In our recently published white paper, entitled Stopping Unauthorized Online Sales and Product Diversion we have identified a new approach to handling unauthorized online sales, which integrates legal, technology and investigation-based techniques into a comprehensive system designed to efficiently and effectively stop unauthorized sales.

About Inovtech Services

Inovtech Services a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them – thereby ensuring that our interests are 100% aligned with yours.