INTRODUCTION · The “Colgate” Doctrine ... by well executed product presentation and excellent...

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INTRODUCTIONPaul McCarthy

President & COO

AASA

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Anti-Trust guidelinesIt is the unqualified policy of the Motor & Equipment Manufacturers Association to conduct its operations in strict compliance with the antitrust laws of the United States.

MEMA's antitrust policy prohibits any discussions which constitute or imply an agreement or understanding concerning:

1. prices, discounts, or terms or conditions of sale;

2. profits or profit margins or cost data;

3. market shares, sales territories or markets;

4. allocation of customers or territories;

5. selection, rejection or termination of customers or suppliers;

6. restricting the markets in which a company may resell products;

7. restricting the customers to whom a company may sell; or

8. any matter which is inconsistent with the proposition that each manufacturer, wholesaler and distributor must exercise its independent business judgment in pricing its services or products, dealing with its customers and suppliers and choosing markets in which it will compete.

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AGENDA1. Introduction

2. Legal Perspective

3. Implementing MAP Policies

4. Voice of the Customer

5. Potential Issues & Concerns

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Serving your needs in the Automotive Aftermarket for 20 years

Expertise

Organizational Optimization

Category Management

Market Intelligence

Pricing & Product availability

Inventory Optimization

New Part Development data

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LEGAL PERSPECTIVEDan Jasnow

Attorney

Arent Fox

Smart In Your World arentfox.com

MAP Policies: Legal Landscape and Practical Tips

Presented by

Dan Jasnow, Attorney, Arent Fox


Antitrust Reminder

− Trade associations and members are subject to federal and state antitrust laws. Associations are particularly vulnerable to antitrust enforcement, because an association is a group of competitors joined together for a common business purpose.

− Whether or not to implement a MAP policy is, and must be, a unilateral decision by each company.

− Members should avoid discussion of sensitive business practices and strategies, including, but not limited to:

− Current or future prices.− Standardization or stabilization of prices.− Pricing procedures.− Complaints to a competitor that its prices constitute unfair trade practices.− Refusal to deal with a corporation because of pricing or distribution practices.

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Legal Background


Background on U.S. Antitrust Law

− U.S. Antitrust Law is intended to protect competition and consumers.

− It prohibits unreasonable restraints on trade.

− Two primary types of restraints: Horizontal and Vertical− Horizontal: Almost always illegal. Think horizontal price fixing.

− Vertical: Can be legal, but exercise extreme caution.

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Manufacturer Manufacturer Manufacturer

Distributors

Retailers

Horizontal Restraints• Price fixing• Market division• Refusal to deal

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Manufacturer Manufacturer Manufacturer

Distributors

Retailers

Vertical Restraints• Resale Price

Maintenance• Exclusive

Distributorship• Territorial

Restrictions

Distributors

Retailers

Distributors

Retailers

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The “Colgate” Doctrine

− Independent action by a manufacturer is not prohibited under anti-trust law.− United States v. Colgate & Co. (1919)

− A manufacturer has the right to:− Deal or refuse to deal with whomever it chooses; and

− To announce in advance the circumstances in which it will refuse to sell, so long as it does so independently.

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What is a MAP Policy?

− A unilateral policy (i.e., not an “agreement”) set by a manufacturer or supplier announcing that it will not do business with companies that advertise its products below a certain price.

− Compare to Resale Price Maintenance (“RPM”): Agreement between manufacturer and distributors about actual sales prices.

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Key Characteristics of MAP

AdvertisedPrice

Unilateral


Manufacturer Manufacturer

Retailers

Vertical Restraint

Distributors

Retailers

Distributors

MAP

Lower risk because:1. No attempt to

control actual prices.

2. Policy instead of agreement.

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Pro-competitive Benefits of MAP Policies

− Encourage retailers to invest in better services for consumers

− Discourage free-riding by retailers that don’t offer customer service

− Help protect the company’s reputation and goodwill

− Encourage heterogeneity in retailers and distributors

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Red Flags

− Coordinating with competitors or suppliers over details of MAP policy.

− Pressuring retailers to charge a set price.

− Negotiating deviations to MAP policy for certain suppliers.

− Discriminating in policy implementation.

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In re Universal Music & Video Distribution Corp. (FTC, August 30, 2000)

− The music industry experienced a retail price war in the early 1990s, as new music retailers lowered prices for CDs in an attempt to gain customers and market share.

− In response to this price war, the five largest distributors of recorded music in the U.S., which together accounted for nearly 85 percent of all CD sales, adopted nearly identical MAP policies:

− Retailers had to advertise CDs at or above the MAP in order to receive cooperative advertising funds.

− The policies covered all forms of advertising and even applied to advertising paid entirely by retailer.

− Retailers had to comply with MAP on all in-store signs and displays, regardless of whether the distributor contributed to their cost.

− If retailer violated the policy, it would lose millions of dollars in cooperative advertising payments.

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What Got Them in Trouble

− FTC findings:− The MAP was implemented with the anticompetitive intent to limit retail price competition

and stabilize prizes.

− The MAP policy provided no benefit to consumers.

− Takeaways:− Coerciveness of the policy

− Applied to in-store advertising

− Apparent coordination among the distributors

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Elements of a MAP Policy


1. Introduction

• This policy is a statement of the Company's unilateral policy and expresses the terms upon which we will deal with our customers. The Company does not seek, nor will it accept, any agreement or understanding with respect to the prices you may advertise or charge at any time.

• This Policy is not a contract or an offer to form a contract. The Company does not ask for, and will not accept, any agreement about an account’s compliance with or acceptance of this Policy

Unilateral

• The Company is implementing a MAP Policy to help promote the brand equity of our products through our resellers/distributors.

• The Company believes that its products sell best when they are supported by well executed product presentation and excellent customer service.

Justification

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2. Scope

• The products covered by this policy are listed in Schedule 1, (“Covered Products”). The Company reserves the right to modify Schedule 1 from time to time.

• The Company has established a Minimum Advertised Price for all our [description of products] (“Products”).

Covered Products

• This policy applies to all forms of dealer advertising including mailings, catalogs, displays at consumer exhibitions and shows, and any and all other forms of advertising media, including, without limitation, the Internet and any other electronic network.

Type of Advertising

• This policy applies only to advertised prices, and does not apply to the price at which products are actually sold.

• The MAP policy does not apply to solely on-premise or in-store advertising that is not distributed to customers

Exclusions

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3. Statement of Policy

• The Company reserves the right to discontinue doing business with any reseller that advertises the Products at a price lower than the MAP.

Policy

• Advertisements that reflect or suggest a price lower than the applicable MAP, including, but not limited to advertisements such as “BOGO,” “buy one get one,” “dollars-off,” “percentage off” or the applicable MSRP with a line through it, are unacceptable.

Advertised Discounts

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4. Enforcement

• Upon receiving notice from Company, Retailer will immediately correct the violation.First Offense

• If a first violation is not corrected, or if Retailer violates this Policy a second time, the authorization of such Retailer to purchase any or all of the Covered Products will be suspended for 30 days.

• If Retailer violates this Policy a third time, the authorization of such Retailer to purchase any or all of the Covered Products will be suspended for 90 days.

Repeat Offenders

• The MAP policy will be enforced by Company in its sole discretion and without notice. Dealers, distributors, and resellers have no right to enforce the MAP policy.

• The Company will not, under any circumstances, discuss the business dealings of one Account with another Account. The Company seeks no complaints or comments from its Accounts about the practices of any other account. To the extent that such information is received by Company, it will determine its course of action, if any, unilaterally and its sole discretion.

Unilateral Enforcement

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Online Examples


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“Lowe’s is committed to offering the lowest prices possible. Since we’ve priced this item lower than the manufacturer suggests, the price can’t be displayed until the item is in your shopping cart. Don’t worry, you can easily remove it from your cart if you decide not to buy it.”


Questions?

ContactDan Jasnow

Attorney

202-857-8967

[email protected]

mailto:[email protected]

A SUPPLIER PERSPECTIVEChris Gardner

Sr. Vice President

AASA

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IMPLEMENTING MAP POLICIES

Debbie Hodson

ITW Global Brands

Cary Redman

Edelbrock

Richard Barsamian

Advanced Clutch Technology

ITW Car Care – Rain-X® Wiper BladesDEBBIE HODSON, STRATEGIC MARKETING DIRECTORMAP VIRTUAL SUMMIT11/19/2020

ITW Car Care – Rain-X Wiper Blades

• $250M Brand/$890M Wiper Category/28%

• #1 Brand in $ Share and Unit Share

• Grew our $ Share 32% over the Last 12 Months

• Play in the Premium Wiper Category

• 90% Retail/20% Do-It-For-Me

• #1 Customer is Walmart

Source: NPD, RTS period ending, Oct 2019

Why MAP?

• ITW Car Care implemented a MAP Policy in an effort to protect the brand equity and value of the Rain-X wiper blade brand; to protect reseller margins; and to enhance our ability to provide our channel partners (“Resellers”) the proper levels of service to their customers.

Rain-X Wiper Blade MAP Program

• Launched Q1 2018

• Sales FAQs

• Intro Customer Cover Letter

• Authorized Reseller Policy

• Authorized Distributor Policy

• Authorized Online Seller Policy

• Partners

• ORIS – monitoring services

• Vorys – enforcement services

Sponsored By

IMPLEMENTING MAP POLICIES

Debbie Hodson

ITW Global Brands

Cary Redman

Edelbrock

Richard Barsamian

Advanced Clutch Technology

Sponsored By

VOICE OF THE CUSTOMERDavid Wilbanks

Sr. Vice President, Merchandise

O’Reilly Auto Parts

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POTENTIAL ISSUES & CONCERNSJon Rubich

President & Owner

Insights 2 Action

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Don’t Forget to go to YourCarYourdata.org

Today

And see how you can help create an even playing field for the consumer!

Thank you for your participation

Expertise


Category Management

Market Intelligence




Contact on Jon Perkins at [email protected]

281-773-4563


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Join Us for the Next AASA Webinar

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Lessons for Aftermarket Suppliers from the Commercial Vehicle Industry

Tuesday, January 21

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Sponsored By

Don’t Forget to go to YourCarYourdata.org

Today

And see how you can help create an even playing field for the consumer!

Thank you for your participation

Expertise


Category Management

Market Intelligence




Contact on Jon Perkins at [email protected]

281-773-4563


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INTRODUCTION · The “Colgate” Doctrine ... by well executed product presentation and excellent...

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