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Market Watch

MAP Policies: Why MAP Pricing Is Not Price Fixing

Minimum Advertised Price Minimum advertised price policies or MAPs are not exactly popular with discount retailers. Add to that the fact that the media and even politicians see them as price fixing, going so far as to have MAP policies considered illegal.

But should MAP pricing be illegal? Read on to find out.

Price Fixing

MAP pricing isn’t price fixing and it’s not some form of price fixing scheme. Price fixing is illegal.

According to the Federal Trade Commission, price fixing is when two or more businesses conspire to employ actions in order to reduce, increase, or stabilize a certain service or item’s price without offering any reasonable justification. Essentially, when two competitors sell the same item or service at the exact same price or when one business sells and shares pricing information with another business, then that is considered price fixing.

Supply and demand, as well as free markets, must set product prices. Whenever businesses set prices dishonestly, as in price fixing, there’s always an adverse effect that would ripple down to all parties involved in a transaction. Businesses would be unable to vie for customers using fair prices and won’t be able to satisfy their needs, while smaller businesses won’t be able to compete with big business at all. Consumers will be forced to buy items or hire services at bloated prices.

MAP Pricing

With a minimum advertised price policy in place, businesses could sell what they’re offering at lower price points, which is a win-win situation for both the retailers and their customers. They’re just not allowed to advertise discounted prices that are below the MAP standard of the manufacturer of the products they sell.

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Minimum advertised price policies are not illegal, but price fixing is. This is because price fixing restricts competition and is unfair to consumers, while MAP policies could help promote fair competition among retailers.

It’s important to note, however, that a minimum advertised price policy might be detrimental to consumers if it specifies a significantly high markup that businesses couldn’t possibly afford to stock up on competing or similar products, resulting in limited product offerings and buying options for consumers.

 

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