The guides provide parameters for different types of price comparisons. The first is a comparison of a current price with a previous price. This affects most “what/now” prices as well as requests for percentage and dollar savings. The key passage dealing with the previous price comparisons states: A unilateral policy is simply an announcement of the brand and must not be part of any agreement or negotiation between the parties. The brand does not “set” minimum advertising or selling prices; On the contrary, it “suggests” or “recommends”. Resellers can set the price at will, but if they are below a brand`s minimum, they can be punished by the loss of discounts, certificates, discounts, and even access to the brand. The reserve price may just be a suggestion, but the cost of ignoring it can be high. This may seem like a legal haircut, but it helps keep everyone involved out of trouble, as even a price-fixing smell can trigger an investigation. NOTE: The states listed above have exceptions to item pricing. Be sure to consult the law or contact the state director for more information.
Based on Ayelet`s decades of pricing policy research and Gene`s experience creating policies for hundreds of B2B and B2C brands, we describe how the best companies design and enforce policies with bite. And we will discuss how to stay on the right side of antitrust, a tipping point where the line between legitimate policies and pricing can easily be crossed without knowing it. There is no doubt that e-commerce will continue to grow. It also seems likely that a small number of high-performing digital retailers will increasingly dominate the relationship between brands and their end users, potentially disrupting historical and mutually beneficial affiliations between brands and their preferred authorized retailers. A well-developed and well-implemented pricing policy can help restore and maintain this balance. Of course, brands only have influence with their authorized resellers – those with whom they have a contract that defines the terms of the relationship, or to whom they sell directly. Unauthorized resellers who purchase and market third-party branded products usually don`t care about pricing policy, as the loss of financial incentives or access to products is an empty threat. After all, they don`t get such incentives anyway and shouldn`t sell the brand in the first place. Being cut off isn`t a problem either, as they already have back-channel access to the brand. (Not surprisingly, an important part of an effective pricing strategy is to strangle dealers` supplies on the grey market and use other remedies, such as trademark counterfeiting or misleading advertising.) Again, the chatter is incredibly vague. The term “significant number of sales” is not clearly defined, leaving the door open to interpretation. However, retailers should be aware that references to savings on list prices or MSRP should only be considered legitimate if sales at that price have recently been made in the market.
This saying is widely violated, although the auto industry, where cars are almost never sold at the MSRP, circumvents legal problems by not announcing specific prices. For brands that sell in the U.S. and Canada, there is an effective countermeasure: creating and enforcing pricing policies that prevent anyone from promoting or selling a company`s products at an unauthorized discount. Because creating a strong policy usually benefits from specialized legal or business expertise, most brands get outside help at this stage. Our review of hundreds of MRP and PAM policies revealed more differences than consistency. Some are as short as a single page, but the best ones are more comprehensive, providing retailers with clear guidance on what the brand allows (e.g., free shipping) and prohibits (e.g., Product Grouping). Politics can be soft or rigid, specific or vague, friendly and familiar or more threatening and legalistic. However, it is not enough to develop a declaration of principles.
Marketers and marketers need to be trained in these pricing practices. Compliance with the pricing policy should be integrated into the promotional planning and development process. To support compliance, retailers should conduct regular audits of internal pricing practices and develop corrective actions and training as required. An uncovered agreement between competitors to fix prices is almost always illegal, whether prices are set at the minimum, maximum or within a certain range. Illegal price fixing occurs when two or more competitors agree to take measures to increase, lower, maintain or stabilize the price of a product or service. Pricing systems are often developed in secret and can be difficult to detect, but an agreement can be uncovered from “circumstantial evidence.” For example, if direct competitors have an inexplicably identical model of contract terms or pricing practices as well as other factors (e.g.dem lack of a legitimate and independent business explanation), an illegal price-fixing agreement may be the reason. Invitations to coordinate prices may also be a cause for concern, for example when a competitor publicly announces that it is prepared to end a price war or to raise prices when its competitor is willing to do so. When adopted and enforced unilaterally, MRP and MAP policies have been legal in the United States for more than a century.
(MRP agreements have generally been legal for about a decade, while MAP agreements have had this status since at least 1987.) Canada has generally approved policies and agreements since 2009. It should be noted, however, that pricing policy in the United States may still give rise to pricing indicators and antitrust controls if it is established that they are agreements between a brand and a reseller on the selling price. Ultimately, pricing policy is about maintaining and enhancing brand value, and decisions about this must align with the company`s values. Determining the “right” minimum prices is an art form that takes into account brand positioning and objectives, retailers` margin needs, and the competitive environment. Prices that are too high will discourage sales, while those that are too low can leave money on the table and hurt a brand`s resellers by allowing unhealthy discounts. It should also be noted that chapter IV, section C. The uniform unit price list allows the use of metric or customary units. This complements the Fair Packaging and Labeling Act (FPLA), which requires packages to label both metric and regular units with net content labeling. FPLA applies to products regulated by the Food and Drug Administration (FDA). The decision to provide information on unit prices in metric terms rests with retailers.
The uniform price list only applies if shops voluntarily provide information on unit prices. The unit of measurement chosen must be uniform in similar places within the category. A review of government regulations on pricing in advertising reveals striking similarities and major differences. Almost every state has a law that prohibits false or misleading statements about the reasons, existence, or amount of price reductions. In fact, many government regulations use exactly the same language to describe prohibited activities. Many states have also introduced rules for previous price comparisons (“was/now” prices), but unfortunately there are few similarities in detail between states. Alaska insists that regular prices be set for at least fourteen days before a discount. Meanwhile, in Massachusetts, a previous price comparison is considered valid if one of these three conditions is true: Unit price regulations vary by state and county. They apply to products that retailers sell piecemeal, such as weight or length.
For example, a grocery store that sells apples at $2 per pound must display this uniform unit price and use it for all applicable products. The same store cannot sell the same apples for $1 per apple. Some local regulations require retailers to round unit price measurements to the nearest cent or fraction of a cent and provide the measure to the buyer with the unit cost. To arrive at a set of advertising pricing guidelines, retailers need to understand the sources of potential financial liability associated with non-compliance with federal and state pricing rules. As mentioned earlier, the FTC has not played an active role in monitoring fair advertising practices for decades. Given the current anti-regulatory environment in Washington, D.C., this apathy is unlikely to change anytime soon. On the other hand, attorneys general and even city attorneys can sue retailers based on applicable laws. The motivation of these officials is not only to protect consumers or punish a retailer who transgresses, but also to teach other retailers a lesson to motivate them to comply with the rules.
As a result, large nationally ranked retailers tend to be targeted more often than smaller local players. Some states, such as California and Michigan, have a reputation for being particularly aggressive in enforcing fair advertising practices.