Legal Briefs Podcast: Are Amazon-Provided Discounts a MAP Violation?

Amazon has a program that discounts third-party listings without notice to the seller. Attorney Jeremy Richardson explains why that usually shouldn't count as a MAP violation, and how to write your policy so it doesn't backfire.

Amazon runs a little-known program that quietly discounts a third-party seller's listing. Amazon foots the difference, but the seller isn't consulted, and the retailer can only opt out store-wide, not listing by listing. In the first episode of Legal Briefs, MAPP Trap puts the resulting question to attorney Jeremy Richardson (Freeborn & Peters): if Amazon drops the advertised price on a retailer's behalf, is that retailer guilty of violating the brand's MAP policy?

Jeremy's answer starts with a distinction brand owners often blur: a MAP policy governs the advertised price, not the actual sale price, and it's the retailer's own conduct that matters. Since the retailer isn't the one changing the price, he doesn't view Amazon's automatic discount as a policy violation in the traditional sense, but he's quick to flag the practical trap that follows: if a brand carves out an exception for Amazon-driven discounts, competing sellers' repricing bots will chase that price down anyway, and the brand is right back in a race to the bottom with no clean way to explain why Amazon got a pass.

• The core issue: Amazon's discount changes the advertised price without the retailer's say-so, and the retailer can only opt out of the whole program, not just MAP-sensitive SKUs.
• Jeremy's take: Not inherently a MAP violation, since the retailer isn't making the pricing decision, but brands should decide explicitly and write the policy accordingly rather than leaving it ambiguous.
• The risk of exceptions: Carve out Amazon and other sellers' automated repricing tools will still chase the lower price, dragging the whole channel down with it.
• On uneven enforcement: Legally permissible in some states (courts defer to the "business judgment rule"), but Jeremy still recommends treating similarly-situated retailers the same to avoid inviting an unfair-business-practices claim.
• Practical recommendation: Decide up front whether Amazon-driven discounts count, apply that decision consistently across every retailer on the platform, and consider having your monitoring provider flag which violations are Amazon-subsidized so enforcement decisions are based on real information, not guesswork.

Full Episode Transcript

[00:00] Welcome to MapTrap's legal briefs, the podcast where we explore specific strategies and tactics used by brands to protect their pricing, distribution and intellectual property. The information in this podcast is provided for general informational purposes only. It is not legal advice. Listening to this podcast does not create an attorney-client relationship between you and MapTrap's guest presenters. Listeners should seek legal advice from a lawyer licensed in the listener's state. Welcome to the first episode of MapTrap's legal briefs. I'm Ron Solomon, the CEO of MapTrap. We hope our podcast will answer some of the more misunderstood questions about brand protection related topics. To give us the legal perspective, we'll be speaking with Jeremy Richardson, a partner in the New York Law Office of Freeborn and Peters. Jeremy leads Freeborn's consumer products industry team. Our first podcast subject is Amazon-provided discounts. Apparently Amazon has a program through which they'll lower the price of products being sold by third-party sellers. Amazon pays the difference, but they don't tell the seller when they're doing it. So the question is, if Amazon drops the price on a third-party offer, is the third-party guilty of violating map?

[01:25] Brands believe they are, especially since the third-party can opt out of the program.

[01:30] Hi, Ron. Hi, Jeremy. Thanks for the introduction and thanks for the question. I think this one is a pretty interesting question and raises a lot of different issues. First of all, we have to look at the distinction between the advertised price and the selling price. Remember that we are through our minimum advertised price policies not regulating the actual price chart to the consumer. We're talking about the price through which a retailer can advertise your branded products. I want to make sure we talk about that distinction about what Amazon is charging the ultimate end user versus the advertised price. After we talk about that, we can also think about looking at different map policies, because in some cases, you may allow certain types of discounts to occur or advertise discounts to occur and others not. I personally think that with this one, when Amazon is taking control and changing the advertised price that retailers not making that decision or determination, I would not necessarily find that as a violation of the minimum advertised price policy that a brand has created and instituted asking its retailers to abide by. But we could have a situation where you want to, you, the brand owner want to make sure that not just the retailer is with the minimum advertised price or abiding by the minimum advertised price. But also anybody that is sort of downstream in the sales chain before it gets to the end consumer. You also raise a really good point here with the Amazon program where the retailer can opt out. So if we want to be really sure that our retailers are going to be abiding by the minimum advertised price policy that you've set up, you might want to consider specific language where the retailer who uses the third party platform, be it Amazon or any of the other companies out there. That have this type of situation and the ability to opt out, we might have specific language that says that in the event that a third party platform for which you're selling product or take that back advertising product is changing the price and you have an opt out retailer, you must opt out to abide by the policy. Now, that doesn't seem 100% fair. Look, I'm obviously a brand advocate, but it doesn't seem necessarily that fair to a retailer who may have 10,000 say Asians on their Amazon store and some of the products that they have are not subject to map. But the way Amazon runs this program apparently, you may not opt out on the ace and level, you have to opt out of entire store and therefore you would miss out on selling greater quantities of goods if that were the case and isn't that a little bit of coercion on Amazon's part.

[05:53] Well, I'm not sure what the intention is on Amazon's part and whether I would consider coercion, I haven't really given that a lot of thought and I'm not sure that this is the appropriate forum for doing so. So I'm really focused on the brands and how they can protect their market. So let's put that one aside for the moment. I do think it is a difficult choice for a brand because it is asking the retailer to do something which could ultimately reduce the retailer sales. But I think a map policy has that effect to some extent. Regardless of whether the retailers are selling through Amazon or other third party platforms or merely selling through their brick and mortar exclusively. There's that rub as well. And again, I want folks to be aware of the difference between the retail price at which a product is sold to an end user and the advertised price. I think there's maybe some gray area there with respect to Amazon setting the retail price versus the advertised price in the internet world that it does get a little confusing. I'm not 100% sure of the most modern repricing bots on Amazon. I know that there are a number of criteria you can program into them when you're repricing. I'm not 100% certain whether or not there's an allowance to ignore Amazon provided discounts when repricing on the platform. But part of my concern for the brands is, okay, so let's just say they put in their map policy that. It's an Amazon provided discount. We're going to let you slide and we will not consider that a map policy. So what happens downstream when the other sellers are using their automated repricing box to drop prices. And so now they start responding to the Amazon provided discount and we're right back to the race to the bottom. And then they cry foul and say, well, you allowed Joe blow to do this. Why am I not allowed to?

[09:10] Look, I think as a general rule, minimum advertised price policies should be consistently enforced as to all of your retailers. That by the way, at least in New York is not the state of the law. And in force and again, New York, brands can choose to enforce the minimum advertised price policies differently as to different retailers. And yes, some retailers who are treated differently may cry foul. They want to be careful about in the application of the policy is to be sure that it is a unilateral action and that it is not an agreement between brand owner and any one or more retailers because that's where we get into the price fixing concerns. I hear you and I definitely acknowledge your point. It is a slippery slope. I would say if you're going to sell to retailers who are using Amazon as a platform. I would have my math policy consistently requests that each retailer either check the box to avoid the Amazon price discount or cart that out of your policy. And if Amazon is the one that's creating the discount and it's truly not the retailer, then make it fair across the board that would be that would be my recommendation. Again, even though it's a little bit different than strict application of law laws fluid. Yes, it is and evolving. So do you have a personal preference on this, you know, if someone were to call you and say, okay, so this is what's going on with Amazon. Do you think that we should allow or disallow this type of behavior and add it to our policy. So here's here's where I'm going to be the real lawyer and give the lawyer stands for and say it depends. It depends. I think it depends to some extent on the product category. I think it depends on the standing of the brand, the luxury or not luxury. What the price point is that we're talking about are these high we sought after expensive items are they widgets that are low price and high volume. Those types of things I think are all important in crafting a map policy that is specific to the brands goals and desires. So I think if I were counseling a luxury brand with high price items, then I probably would. I would recommend that. That they check the box be, but the box be checked and that you have the retailers opt out of Amazon reducing the price. If we're talking about, you know, nuts and bolts. I think I have, unless they're very expensive, nuts and bolts, I would have the opposite opinion. Okay, well, in this event. Companies like map trap. Need to be able to program into the algorithms, whether or not a listing is an Amazon provided discount or not, in which case, if that were the case, at least the, at least the enforcement efforts on the part of the brand. I wouldn't have to be a very wonky thing and trying to figure out which is which. So some kind of a flag on it so that Celerix was opted out of this type of listing, if that were indeed the case, anything that you think. I would say luxury brands. But are there any other considerations you think a brand should make when determining whether or not to allow this or not. And as a backup question to that. Would it be okay to say seller a. It's okay if Amazon does a discount on your. Store, but not seller be. So I think if seller a and seller be are both selling on Amazon. So they're essentially all the Amazon platform. I would again recommend that seller a and seller be treated the same. I would not recommend treating them differently again in New York. So are allowed to treat different retailers differently. And the courts will defer to what's called the business judgment rule with the explication that the company knows better how to run its business than the court for the judge does. I don't know that that's the case in all 50 states. It certainly is in New York. And it may be in the state where you're particular client is I don't know. But I would typically recommend that. I would recommend that one of the other retailers be treated the same. Now, one area where you might deviate from this is if one retailer is an e-commerce retailer, and the other is a true brick and mortar, there may be a good reason for treating them differently. I have what I thought was sort of a, I shouldn't say a new one to me, but an unusual situation where actually the brick and mortar store was at a price advantage to the e-commerce store. I shouldn't be, let's say in this example, they were selling filled sand bags that are 25 pounds each. Now, it's a lot less expensive for the retailer to have a consumer drive up to the brick and mortar store. Load that 25 pound bag of sand into the car and drive away. Then it is for the retailer to have the UPS or FedEx or other truckers show up. And what does it cost to ship a 25 pound bag of sand, right?

[18:12] I had always thought of the other way where the overhead is less expensive for the e-commerce retailers. There's an example where it's not true. You might treat these two differently, and you might say, gosh, we want to sort of level the playing field for the e-commerce stores. The brick and mortar store, so you might allow that Amazon to lower the price and let Amazon absorb that. It's not going to change the wholesale price that you're charging, and it might not throw a wrench in the work between the e-commerce and the brick and mortar because it actually does for the level of the play. That's a situation where I might consider treating retailers a little differently. But getting back to the original example, store a store be both selling on Amazon. When you say check the box, when you say it don't have to not illegal in New York, but seems, seems to be on fair just, you know, how you're treating different retailers. Agreed.

[19:48] Well, this has been great. I know I've definitely walked away with some knowledge that I can pass along to our clients, and I know that anyone listening to the podcast will hopefully walk away with something in their back pocket to add to their policy and will certainly begin to scrutinize their listings a little more.

[20:15] Thank you, Jeremy. Great stuff. Really appreciate your thoughts. Your background is fantastic. And I know this is going to go a long way in helping brands to protect themselves online. So there we have it. That is the end of the inaugural legal briefs podcast and we'll be back next week with another podcast with Jeremy Richardson. Have a great day. If you'd like to submit a question or topic for a legal briefs podcast, email them to legal briefs at maptrap.com. For more information about how maptrap can help you with your online brand protection needs, visit www.maptrap.com.