It is no secret that consumers are spending a lot of money online each year. In fact, e-commerce grew 16 percent in the first half of 2016, while U.S. consumers are projected to spend $385 billion online this year, according to a Nov. 2016 Business Insider article. By 2020, Business Insider’s premium research service projects that number to rise to $632 billion.
Without question, e-commerce is on the rise, and it is showing no signs of stopping.
This trend can be largely attributed to the success of the increasing number of third-party online marketplaces – not only the major e-retailers but also others that have emerged in recent years.
Many companies have utilized these online marketplaces to sell their products, both directly and through the aid of authorized distributors. And certainly it can be highly beneficial to sell online, outside of standard company websites.
Regardless of whether companies might be taking active roles in selling on third-party websites, e-commerce has made companies susceptible to abuse at the hands of online sellers. Therefore, it is important that companies work to both control pricing and stop unauthorized sellers in order to reap the benefits and avoid the pitfalls associated with online sales.
One common mechanism for safeguarding a brand and controlling pricing is establishing a minimum advertised pricing policy, or a MAP policy.
MAP policies are unilateral policies that manufacturers establish through which they declare the minimum prices at which authorized retailers or distributors are supposed to advertise the products. It is important to note that MAP policies are not actual agreements and they do not restrict the prices at which authorized distributors can sell the company’s products.
An effective MAP policy can benefit companies in a number of ways, including leading to price coordination among sellers, being able to better control margins, avoiding downward pressure on pricing from large retailers, and keeping authorized distributors happy and complying with company policies and procedures.
Establishing MAP policies (or other means of controlling prices) is only step one, however; companies must actually enforce them. Studies have shown that unauthorized resellers are more likely to violate MAP policies than authorized distributors.
It is, therefore, critical that companies do more than merely monitor their authorized distributors and ensure MAP compliance among those sellers. They must also protect themselves from unauthorized resellers and the direct and indirect harm they can cause.
In short, we recommend a two-step approach to stopping unauthorized sellers: 1) companies must establish legal claims that enable them to enforce their trademarks, and 2) companies should implement a graduated enforcement system designed to efficiently and effectively eliminate unauthorized sales (and deter future impermissible sales).
For more on these steps and the related processes, read our white paper from earlier this year, “Stopping Unauthorized Online Sales and Product Diversion.”