Legal Briefs Podcast: Chewy Does It, Why Can't I? Uneven MAP Enforcement from the Retailer's Side

It's the question every independent retailer asks: if Chewy and Amazon can discount below MAP, why can't I? Jeremy Richardson and IndyPet's Todd Dittman explain the legal reality and the practical moves smaller retailers do have.

IndyPet's Todd Dittman returns with the question his member retailers ask most: their large online competitors discount below MAP seemingly without consequence, so why does the brand hold everyone else to the letter of the policy? Jeremy Richardson's answer is direct: there's genuinely not much legal recourse here. Brands are entitled to enforce MAP unevenly under the business judgment rule, and courts won't second-guess that decision. The uncomfortable truth for independent retailers is that unfairness isn't the same thing as illegality.

The episode turns constructive from there, though, running through the real options smaller retailers have: differentiated packaging or sizing that mass retailers won't carry, buying groups that create real negotiating leverage, vetting a brand's actual MAP enforcement track record before agreeing to carry it, markdown-dollar or margin-guarantee provisions that larger retailers already negotiate, inventory put-back rights, and simply buying conservatively against a product's shelf life so a MAP-driven markdown doesn't leave a retailer holding expired stock.

• The legal reality: uneven MAP enforcement across retailer size is generally permissible under the business judgment rule, so there's little legal recourse for a smaller retailer who feels singled out.
• First sale doctrine still applies broadly (a retailer can resell what it legitimately bought), bounded by the same material-difference and quality-control exceptions covered in Episode 7.
• What retailers can actually do: negotiate channel-specific packaging/sizing, join buying groups for leverage, vet a brand's enforcement record before stocking it, and negotiate markdown-dollar or inventory put-back protections.
• Manage shelf life risk by buying conservatively against expiration dates rather than sitting on large volumes that can't be marked down safely.

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 rights. 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 another episode of MapTrap's legal briefs, podcasts where we explore specific strategies and tactics used by brands to protect their pricing, distribution, and intellectual property. As usual, joining us by telephone is Jeremy Richardson from Smith-Gambrell. He's an expert on consumer products, but we also have a special guest today. We have, with us Todd Dittman, Todd is the executive director of Indy Pet, a non-profit trade association whose mission is to empower independent and neighborhood pet retailers to work together as peers for the well-being of pets and pet owners as they maintain a strong, sustainable, and growing place at the heart of the pet industry. Now Todd's role is to implement the Board of Directors Strategic Plan and run the operating committees who are initiating the plan. So Todd, you have some specific questions that were posed by your members, and maybe we can tackle one of them today.

[01:38] Thanks, Ron. Really appreciate you having me on the podcast as the great way to really address some of the issues that the independent retailers have that have joined our association. At the beginning of our association, before we even had a strategic plan for me to manage, we did a survey, and we surveyed all of the independent retailers that we could grab it to Super Zoo a couple of years ago, and found that one of the biggest issues out there for them, not only for them, but also for the brands and the independent sector, is that of map pricing and map pricing violations, and so the reality of it is, we see our competitors at Amazon and Chewy discounting and going below pricing, map pricing, and my members want to know why can't I?

[02:34] Okay, Amazon and Chewy are discounting. Why can't I?

[02:38] That's a great question, and pet stores aren't the only ones that ask that. I mean, they're certainly the only ones that ask that about Chewy, but other industries have larger retailers online, who seem to get away with more violations than the more specialty-oriented segment of online sellers, but I think Jeremy really can answer this best, Jeremy.

[03:02] Yeah, sure. Thanks, Ron, and Todd. So nice to meet you. Welcome to the podcast.

[03:06] Yeah, it is a great question. It is an issue that comes up quite often, and sadly for the retailer's perspective, the answer really is there's not a lot you can do about it, or there isn't anything actually you can do about it. Brand owners can enforce their map policies unevenly. They can give, well, it's hard to say preferential treatment, but they can allow violations to go on for some retailers, not enforce the map policy, but as to other retailers enforce the per second and third. It really is up to the brand, and that's because of what courts call the business judgment rule. Courts are not going to impose their own judgment for the company's decision-making process, and courts understand that it really is the business owners and operators that are best able to make decisions for their companies. So is it fair, I don't know, but certainly there's no legal recourse to address that. I have a quick question for you. This brings up a question that we hear from retailers all the time. Okay, so you've got a map policy, but I bought the product. Don't I own it?

[04:28] Can't I sell it, do whatever I want with that product?

[04:31] I think, generally, broadly speaking, the answer is yes, there are some exceptions to that. We've talked about trademark infringement and the first sale doctrine and material differences. So you as a retailer have to continue to sell a brand's products in the way that reflects the brand's image appropriately, but the answer is, as the retailer, you set the price, you can choose to abide by the map policy or not, and then it's up to the brand owner. If you don't abide by the map policy, it's up to the brand owner to decide whether to enforce it or not, and by enforcing it, that could include stopping all sales to you in the future. So thanks for that, Jeremy. The, you know, any pet is trying to address the idea of bringing a light to these violations. But we're able to do that. What can a retailer do once they see that maybe they're a part of it, or they are a victim of it?

[05:35] They, or one of their suppliers is a violator.

[05:40] Well, I like to think, or I hope that the retailers and the brand owners lack in partnership and act in a mutual best interest and come up with creative ways to address these issues. Often we see that discounting is occurring on the mask side, at least at a greater level than on the independent store side. So independent stores could work with brand owners to come up with different packaging that is specific to a distribution channels, specific to the independent stores, and by different packaging, not just markings, not just color, but size. Instead of the 50 pound bag of dog food that goes to the mass market retailer, have that brand owner make smaller packaging, four pound, six pound, eight pound, something else that is not going to the mass market. And there is a point of distinction, and you can't compete with those different size packages. Perhaps even come up with a different brand name. And owners often, I'm not sure the word is right, cannibalized, but do things to differentiate their mark. Use a separate mark for different distribution channels, and even the product inside the bag is really the same, the branding, the image, the packaging is different. You know, that's a great solution. Not all brands can afford to do that. Not all brands are going to be willing to do that. But this is the classic uneven playing field scenario that specialty, I mean, it really is universal, this uneven playing field, but that's not to say that the retailers are victims with no recourse in this whole equation. You know, manufacturers need retailers, obviously, it's a symbiotic relationship. So there are certain things that smaller retailers can do. Everybody's driven by the need to make money, and so the larger guys are getting bigger discounts, which gives them more margin to play with. And then the specialty companies, they want the same discounts, but it's not practical. They're not giving, they're not buying the same amount of product. So buying groups is one option that other industries have adopted. I'm sure there are some in the pet industry. And that gives smaller retailers some leverage and some better margins. And perhaps a retailer won't sell to Chewie in Amazon if they know they can make just as much money from the independent retailer population. That's another option. Also retailers can do a job of vetting brands, right?

[08:22] They can ask certain questions, do you have a map?

[08:25] Do you enforce that map?

[08:27] Do you sell to Chewie in Amazon?

[08:29] Do you enforce it against Chewie in Amazon?

[08:32] Literally asked, do you cut them off?

[08:36] They can find out how many online sellers they have. They have an authorized reseller program. And so a bunch of boxes can be checked before that retailer engages with the brand. Another option is that of course they can just buy less, buy less product so that you're sitting on less inventory. There may be some things I think Jeremy, you may be able to weigh in on this. I know that some of the larger retailers have clawback provisions and they have leverage. So they'll go to a brand and they'll say, all right, I will buy it for X and I will attempt to honor your map. But if I can't because market forces drive the price down and I have to lower my price because of that, you at the end of the day are going to give me a rebate. Now, a smaller retailer wouldn't necessarily have that kind of leverage to do it because the brand or distributor will say, go away. But is there something on that same level they might be able to try?

[09:35] Yeah, again, depending upon the retailers' negotiation power, we talk about this as markdown dollars in the retail world, at least in certain segments of the retail world. And it's basically a margin guarantee. So if the retailer is forced for various reasons to discount, to sell below whatever the MSRP is, the retailer may demand markdown dollars from the manufacturer. It's pretty common, especially among the more powerful retailers. Other options for the retailer may be, if there are other brands that are really violating map and making it difficult for us to make margin, we have a put option to take our inventory and send it back to you. If I were the brand, I'd be really careful about selling large supplies many, many months if that agreement isn't placed. But something else, just to be creative that the retailer could do to protect itself. And could that be based on expiration dates or warranties?

[10:42] Yeah, so that's actually a really interesting point here. We're talking about often food, which has a certain shelf life. And we want to be very careful that as a retailer that we're not stuck with a lot of inventory after the expiration date. So there again, I would be careful about how much, as a retailer, I purchase from a brand owner and from the brand owner's perspective, I'd be careful how many months of inventory I'm delivering to a retailer at one time because if I'm going to have to refund that retailer, I don't want to sell them or deliver them a year supply of product on something that has a six month shelf life. Todd, does that answer your questions at all?

[11:25] I know it's not necessarily a bright eyeed and rainbows, but I think maybe there are some good options.

[11:32] Yeah, so it sounds like what you're saying is to build your network of your supply chain and really trust them. And the best way to do that is to contact your trade association executive director to help you out. That is a great idea. Okay, well, thank you very much, Todd. Excellent meeting you. Glad to hear some of the questions from your retailers. I know that we're going to do at least another podcast with you soon. And Jeremy, again, thank you for your expertise and your knowledge. And thank you to listeners for listening to another episode of Legal Briefs. And as usual, if you have any recommendations or questions, feel free to email us at legalbriefsatmapetrap.com. Have a good day. If you'd like to submit a question or topic for a legal briefs podcast, email them to legalbriefsatmapetrap.com. For more information about how map trap can help you with your online brand protection needs, visit www.mapetrap.com.