Let's say you are a retailer selling a brand-name product. You might well have to sign an agreement saying you will abide by something called a
"minimum advertised price," or MAP. It means you will not advertise a product for a price lower than the price a manufacturer sets.
The Wall Street Journal reports that a number of big retailers, including eBay and Costco, are expected to call for the end of MAP. If they are successful, customers could pay less for everything from power tools to big-screen TVs and most other products.
If a retailer violates a MAP agreement, a manufacturer may slow down or cut off supplies, or cut cooperative marketing money the manufacturer supplies to help a retailer advertise the product.
The
Journal explains that the fight over MAP has really heated up in the last year:
Manufacturers have been racing to enforce minimum-pricing policies since last year, when the Supreme Court ruled them to be legal, and not a violation of antitrust law. EBay and a group of other retailers and antitrust advocates are meeting Thursday in Washington to craft a strategy to overturn that ruling.
Manufacturers say minimum-pricing requirements are good because they protect a brand's image from being tarnished by discounting, while helping retailers make enough profit to pay for customer service. Consumer advocates argue that minimum-pricing deals hurt shoppers by keeping prices high and diminishing consumer choice.
The FTC is investigating musical-instrument and audio-gear makers for possible MAP-related antitrust violations. And online retailers BabyAge.com Inc. and HomeCenter.com have sued seven manufacturers with MAP or similar price-maintenance policies, alleging antitrust violations.
Discounting, of course, remains a fixture on the retail landscape -- particularly in this year's holiday shopping season, due to the weak economy. MAP agreements don't cover all products and sometimes manufacturers grant exceptions. Typically the agreements apply to high-end goods, electronics and new product lines that manufacturers don't want to see tarnished by immediate discounting.
Apple, for example,
has a very strict MAP policy, which is why you see uniformity in the pricing of Apple products.
MAP policies are behind a kind of madness that you have likely experienced while shopping online.
Costco, for example, explains that:
Electronics manufacturers sometimes restrict the way prices of their products are advertised.
Because of this, we may show you a price on the item page but when you add it to your cart, the price may be lower.
In effect, customers don't know the price of what they are buying until they check their electronic shopping cart.
The Orange County (Calif.) Register provides more background on this.
