In a previous post, I linked to an article laying out a number of criticisms of Minimum Advertised Price (MAP) programs.
I won’t address each and every one of the numerous critcisms, but starting in this post I will briefly address some of them.
1. MAP programs discriminate against the online sales channel: it’s not obvious what Mr. Pierce means by this criticism. Perhaps he is referring to the difficulties of determining whether or not an online price is “advertised” or not (see my previous post). In any event, generally speaking, cooperative advertising incentives need to be reasonably available to all distributors or dealers.
2. Successful online dealers have significant costs: Undoubtedly true. And if a MAP program were justified on the grounds that e-commerce is cheap and therefore needs price controls, it might be objectionable. But MAP programs rarely are so justified.
3. Manufacturers should not protect inefficient dealers: All things being equal, cheaper distribution is better distribution. But MAP programs do not necessarily prevent cheaper distribution. They prevent the advertising of prices below a certain threshold — or, more precisely, in most cases, present such advertising if the dealer wants to receive some advertising coop monies. Would manufacturers really want to keep distribution costs up?
4. MAP pricing is not automatically legal: The author appears to be conflating MAP pricing and resale price maintenance (RPM). It is certainly true, however, that RPM is not per se lawful.
5. MAP pricing may facilitate unlawful collusion: This is a potential danger, and requires that MAP programs be structured appropriately. Usually, however, this potential danger can be mitigated adequately.
I’ll address more of the criticisms in an upcoming post.