What is Unilateral Pricing Policy? Enforce UPP Violations

If you are a manufacturer or brand owner and want to introduce efficient control over your resale and advertising channels, you may need a MAP policy. However, this is not an equally useful approach for all e-commerce businesses. You may also discover that you could use a Unilateral Pricing Policy (UPP).

In this guide, we will review this pricing approach in detail. You will find out what makes it different from MAP policy and other types of policies, how to introduce it, when a UPP is not a good fit for companies, and which option to choose for your e-commerce business.

A Unilateral pricing policy allows the manufacturer to fix the cost of their products: resellers cannot sell a product lower than this threshold. This is a one-sided agreement that can apply to both offline and online retailers. The major goal of UPP is to make consumers believe they are offered the lowest-priced products. Since the products under this policy are already sold at the lowest rates, retailers do not provide discounts and coupons for them.

A UPP is often recommended as a better alternative to MAP policy because it is easier to streamline and allows you to work with any reseller that accepts this policy model. This approach also prevents violation of antitrust and anti-competitive regulations, and is efficient enough to make resellers abide by the informal agreement.

Since this is a unilateral measure and it covers everything, the manufacturer does not have to worry about resellers using the advertising definition and resale pricing loopholes. The minimum cost defined by the UPP represents the minimum price a retailer can set for these products (be it in ads, store shelves or wherever else).

Finally, a UPP gives a business the power to enforce regulations and penalize violators. While MAP only enables you to reject a campaign, a UPP can entail all sorts of consequences, such as giving you the right to refuse supplying the reseller and terminating the partnership altogether.

Here are a few characteristics typical of UPP - you will see that this is a unique and efficient pricing policy.

A UPP is imposed without negotiations and agreements between manufacturers and resellers. This is a unique, one-way regulation that allows both parties to stay independent. That makes UPP safer from the legal standpoint because this price cannot be altered.

This is a special feature of the UPP policy. It covers both advertised and actual resale prices, which means retailers are not allowed to set a price lower than the one the policy puts forward. There is no confusion between both market participants. A Unilateral Policy is easier to follow and prevents disputes.

UPP leads to better relationships between manufacturers and resellers because pricing is fixed at a certain level. This policy does not presuppose any punishments for retailers, so the product provider does not violate antitrust laws and has flawless business processes.

Initially, the UPP was used in offline retail: it was easier to track prices in brick-and-mortar stores and advertisements. With online retail, manufacturers faced the fact that prices are always different on different websites. It can even occur on a single website when a price becomes lower after the client drops a product into the cart (a discount can apply).

Online marketplaces pose another challenge to manufacturers making it harder to control prices. There are dozens of competing platforms where retailers can sell pretty much anything. This contributes to a highly competitive environment with little place for pricing maneuvers.

Before UPPs became mainstream, smaller unauthorized resellers started disrupting the market making even large retailers struggle to maintain profit margins. Besides, exceedingly low pricing diminishes a product's value in the eyes of consumers. UPP is an efficient legal means of stopping dumping and price wars. It protects retailers from undercutting by unscrupulous competitors and buyers from dealing with businesses that can fail to deliver due service (warranties, returns, etc).

Although both strategies have similar goals, they have a few differences in the way they are executed. Let’s have a look at how UPP and MAP work, and draw a conclusion afterwards.

This pricing policy is leveraged as an agreement between a manufacturer and a reseller that obliges the latter not to advertise a product below a particular price.

In this case, a manufacturer announces the minimum resale price at which a product must be sold. The business can refuse to work with resellers that sell the product below this threshold.

The major difference between these policies is the fact that UPP is non-negotiable, meaning the manufacturer alone decides upon the cost. Since there is no contract, the manufacturers and resellers are completely independent and are free to choose whether to work with one another or not.

Another distinction between these policies is that UPP applies to both advertised and sale prices, while MAP applies to an advertised price only. With MAP policy, manufacturers can sell the product at any cost.

In the e-commerce industry, companies can get confused because advertised and real prices are often the same. UPP can serve as an additional safeguard that resellers will not display different prices on their websites and in shopping carts.

MAP policies come with a few limitations which makes them a bad fit for many manufacturers and brands. If you don’t have cooperative advertising funding for resellers, this sort of policy may affect your business. For example, if your resellers start setting prices that don’t align with the advertised prices, your company’s image might be badly impacted. This is because MAP policies do not allow manufacturers to dictate conditions.

With a MAP policy, you cannot force your retailers to actually charge exactly as much as they advertise because, according to US law, resale prices are not ad prices. Advertising price is what a customer sees before entering the store’s front door. All the rest – store’s walls, price tags, discounts – are resale prices.

In e-commerce, advertised prices can also be different from what customers actually see in a webstore, but, most often, a price drops during the checkout process when the item is already in the shopping cart.

A UPP gives entrepreneurs peace of mind since it can streamline the process and help them achieve their business goals. Sometimes this approach motivates resellers to stop advertising and focus more on sales.

If you've never worked with either MAPs or UPPs, choosing between the two might be a challenge. Some businesses make a mistake when introducing UPPs: they simply copy a MAP agreement text from the Internet, call it their Unilateral Pricing Policy, and state that setting lower prices is a violation of federal antitrust law. But, as we have discussed, a UPP is not an agreement - it is a one-way regulation.

So, which one should you choose for your business?

You may consider MAP when:

• Your company runs cooperative advertising funds for resellers;
• You have come to realize that online ad price wars are a major problem among your resellers.

UPP will be preferable when:

• You want to minimize legal risk and avoid signing agreements;
• You want to change your pricing policy as often as needed without having to update agreements with multiple retailers;
• You want to protect your brand from the impact of both resale and advertised pricing.

Unilateral pricing policies are more difficult to implement than MAPs: they yield results only with proper analysis, planning, enforcement and monitoring. When a UPP is leveraged step by step and you do everything correctly, it can be streamlined and stay efficient for years to come. It is highly recommended to hire an expert who can help with planning and executing the strategy.

Remember that a unilateral pricing policy is a one-time investment: you only need to design it once, and it will work for a long time. At the same time, you will need to keep tabs on the market and price point, and use third-party services to enforce your regulations in case of violations.

Here is how you can implement a UPP step by step.

Define reasonable prices you want retailers to sell products at. It should be the price point at which both the manufacturer and retailers generate enough profit while the product stays affordable for consumers. This is particularly important for popular brands because resellers will start demanding various discounts in order to retain and attract customers – finding the price balance is imperative.

Your pricing policy should be robust: make sure that everyone in your company is committed to it and wants to make the most out of it.

Note that some retailers will refuse to accept your policy, but that does not mean you should change the conditions of your UPP - compromising can make things worse because it will sabotage your efforts to reach your goals.

Once you have elaborated a UPP policy, let your resellers know about it, so you can reinforce your policy more efficiently. Ensure that all conditions are explicit and won’t cause confusion for retailers.

At this step, you and your resellers will decide whether to continue the partnership. Be prepared to face possible challenges:

• If you have a small business, some resellers won’t mind having your supplies cut in case of UPP violations. If some retailers don’t value your business, your policy won’t make much difference for them.
• Many unauthorized resellers on marketplaces fail to abide by manufacturers’ requirements, so you will need to find ways to reach out to them.
• You may have a conflict of interest with your company trying to preserve its brand image and profit margins, and resellers trying to reap short-term gains.

Now that you have a plan for your UPP, you need to assign a policy administrator who will help you negotiate with resellers, ensuring consistent communication, collaboration and abidance by the rules. Make sure that your manager is well-informed about the UPP conditions and is able to address all related concerns.

An administrator will help you avoid directly communicating with retail companies and save your time. Note that your sales department should not be responsible for UPP negotiations - their task is to sell, not align your UPP with retailers’ expectations.

Remember that resellers have the right to terminate their partnership with you if they do not agree with your policy conditions. If some of them do not follow your pricing requirements, you can temporarily withhold supplies or stop working with such retailers.

When your UPP is up and running, you will need to track resellers’ prices on multiple websites and marketplaces. Instead of wasting your time on manual analysis, consider using MAP monitoring software by Priceva. After flawless API integration, it will regularly crawl an unlimited number of retailer websites for you to get relevant pricing information. You can set up instant notifications about price changes and violations and receive detailed reports.

Many manufacturers do not see the difference between UPP and MAP policies and fail to pick the one that delivers the best results for their businesses. Some companies even make the mistake of copying MAP policy agreement texts and using them as a UPP policy. They end up publishing a pricing statement, which is a violation of the antitrust law.

If you want to gain control over product pricing, hire an expert who will help you identify challenges and business goals, then select a suitable policy. That will require research and meticulous planning, but the results you'll get are worth the effort.

In short, if your company has cooperative ad funds and wants to focus on advertising pricing, you will be better off with a MAP policy. However, if you don’t want to bother with agreements and legal risks, consider a UPP. The latter allows you to change prices as often as you need and avoid having your brand image spoiled.

Resale price maintenance is a controversial issue for antitrust law regulators. Generally, the US antitrust law requires companies to make their own independent decisions about how to implement vertical pricing restraints. If a UPP strategy is implemented correctly without harsh penalties and forceful actions towards retailers, it can be considered legal.

This is the manufacturer’s non-negotiable requirement for retailers to sell and advertise a product at a certain minimum sum.