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Maryland Ban on Minimum Pricing Takes Effect Oct. 1
Maryland will be first state to outlaw minimum advertised pricing (MAP), calling it "unreasonable restraint of trade." Manufacturers can avoid litigation by establishing unilateral pricing programs.
Manufacturers selling consumer electronics to retailers, wholesalers and distributors in the state of Maryland will likely need to check their pricing policies.
A new law goes into effect October 1 that prohibits agreements that establish minimum resale prices for goods or services.
Senate Bill 239 (pdf) was passed in Spring 2009 by an overwhelming margin as an amendment to the Maryland Antitrust Act. The law states that minimum advertised pricing (MAP) is an "unreasonable restraint of trade."
Meanwhile, on a national level, legislation is pending in the U.S. Senate that would overturn the Supreme Court's Leegin case in October 2006 (pdf) that allowed manufacturers to establish MAP. The bill, entitled the Discount Pricing Consumer Protection Act, was introduced by Sen. Herb Kohl (D-Wis.) and is aimed at "once again making the setting of minimum retail prices illegal," says Kohl.
In the Leegin decision, the Supreme Court overturned a nearly century old antitrust rule forbidding vertical price fixing — the practice of a manufacturer setting a minimum price below which a retailer cannot sell the manufacturer's product. Consumer rights advocates contend that MAP increases costs for consumers.
Industry veteran and CE Pro contributor Bill Johannesen of Vision Werks Consulting has formed a new partnership with a veteran consumer electronics lawyer, Andy D'Amico, to assist manufacturers. The duo is advising manufacturers to establish unilateral pricing programs (UPP) that enable factories to lawfully manage pricing variability.
UPPs were found to be legal in 1919 in the case of U.S. vs. Colgate. A UPP enables manufacturers to legally establish minimum resale prices, providing their resellers with sufficient margins for hiring and training staff to present and demo their brand attributes and unique product benefits.
"Economic conditions, seismic changes in consumer behavior and contracting markets have driven many manufacturers to turn to expanded distribution to offset declining volume," says Johannesen. He cautions, however, that simply "bolting-on pricing and/or advertising agreements" to existing sales and marketing strategies is merely a stop-gap measure.
"This will not fully counter their channel's reliance on price as the primary sales tool," Johannsen says.
A new law goes into effect October 1 that prohibits agreements that establish minimum resale prices for goods or services.
Senate Bill 239 (pdf) was passed in Spring 2009 by an overwhelming margin as an amendment to the Maryland Antitrust Act. The law states that minimum advertised pricing (MAP) is an "unreasonable restraint of trade."
Meanwhile, on a national level, legislation is pending in the U.S. Senate that would overturn the Supreme Court's Leegin case in October 2006 (pdf) that allowed manufacturers to establish MAP. The bill, entitled the Discount Pricing Consumer Protection Act, was introduced by Sen. Herb Kohl (D-Wis.) and is aimed at "once again making the setting of minimum retail prices illegal," says Kohl.
In the Leegin decision, the Supreme Court overturned a nearly century old antitrust rule forbidding vertical price fixing — the practice of a manufacturer setting a minimum price below which a retailer cannot sell the manufacturer's product. Consumer rights advocates contend that MAP increases costs for consumers.
Establish Unilateral Pricing Programs
Industry veteran and CE Pro contributor Bill Johannesen of Vision Werks Consulting has formed a new partnership with a veteran consumer electronics lawyer, Andy D'Amico, to assist manufacturers. The duo is advising manufacturers to establish unilateral pricing programs (UPP) that enable factories to lawfully manage pricing variability.
UPPs were found to be legal in 1919 in the case of U.S. vs. Colgate. A UPP enables manufacturers to legally establish minimum resale prices, providing their resellers with sufficient margins for hiring and training staff to present and demo their brand attributes and unique product benefits.
"Economic conditions, seismic changes in consumer behavior and contracting markets have driven many manufacturers to turn to expanded distribution to offset declining volume," says Johannesen. He cautions, however, that simply "bolting-on pricing and/or advertising agreements" to existing sales and marketing strategies is merely a stop-gap measure.
"This will not fully counter their channel's reliance on price as the primary sales tool," Johannsen says.
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About the Author
Jason Knott, Editor, CE Pro
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California.
If you want to make a compelling pitch to protect you margins it the tax law and not MAP or UMAP pricing that will win out. MAP was meant to protect vendor advertising funds from being used to subvert their brands. (Subaru Vs.Some car dealer back in the late 70’s early 80’s)
Then the CE biz picked it to protect lines. Then it was Service Merchandise(gone)vs. Pionner car stereo. YOU HAVE ALWAYS BE ABLE TO SELL FOR WHAT YOU WANT; YOU JUST COULDN’T USE VEDOR FUNDS TO DO IT.
UMAP has always been dicey. It relied more on a vendors threat then actually law.
IF YOU LOBBY TO CHANGE THE TAX LAW WHERE INTERNET DEALERS HAVE THIER REAL ADVANTAGE A LOT MORE CONSUMER WOULD COME BACK TO THE LOCAL GUY IF THEY HAD TO PAY TAX ON THAT LCD
IT’S NOT BIG BOX RETAILER THAT DESTROY A MARKET. IF YOU THINK BEST BUY ISN’T MAKING 35+% ON GOODS YOUR OUT OF TOUCH. IF YOU NEED 50% ON TOP OF YOUR LABOR RATES ON HARDWARE YOUR NOT STUCTURING YOU’RE BIZ FOR TODAYS CONSUMER. GET A GRIP!