Under a new state law, retailers in Maryland may no longer have to set minimum prices for certain products.
Due to take effect Oct. 1, the legislation could severely limit minimum advertised pricing (MAP), a long-standing practice in which manufacturers require dealers to advertise no less than a set price for select items.
The law will allow retailers and distributors to take legal action against manufacturers on the basis of enforcement policies that may be deemed anti-competitive.
“Right now, to be part of our rewards program, we say everyone has to abide by our MAP program,” said Mike Massa, vice president of sales at Hayward Pool Products in Elizabeth, N.J. “But going forward, if the rules change, we’ll have to change with them and figure out what we’ll do.”
A 2000 ruling by the Federal Trade Commission stating that some MAP programs, as implemented by the nation’s largest record distributors, were in fact anti-competitive.
However, price maintenance has been widely embraced after a U.S. Supreme Court decision in 2007 found that the agreements did not automatically violate federal antitrust law.
“You look at [the agreement’s] purpose and effect,” said Jon Roellke, a partner at law firm Bingham McCutchen in Washington, D.C. “MAP programs have been upheld, depending on how they’re structured and what their effect is. But that’s on a case-by-case basis.”
Though seemingly dealer-friendly, the change could actually spell trouble for traditional brick-and-mortar retailers in the battle against online competitors.
“A lot of the Internet people who don’t have the overhead and don’t provide the support of a full retail store are able to greatly undercut their MAP pricing because they’re not offering the same services,” said Howard Weiss, owner of Contemporary Watercrafters in Gaithersburg, Md.
What’s more, MAP programs actually can benefit the consumer by ensuring safe shipping and enhanced customer service, Weiss added.
While it’s tough to predict the legislation’s immediate impact, some see the new law as one more sign of a fading policy.
“MAP pricing is going to deteriorate and we’re going to be in a free-for-all,” one industry insider said. “Manufacturers have so many people who are breaking MAP every day that they can’t police it.”
Among the proposed alternatives to minimum pricing programs is allocating brand names separately to Internet and traditional retailers.
Still, it remains to be seen, at least until October, whether retailers and manufacturers wind up lost without a MAP.