Do Retail MFN Clauses Lead to Softening of Competition?

Abstract

Abstract Retail most favored nation (“RMFN”) clauses are commonly found in vertical agreements inked between downstream e-commerce platform providers and upstream suppliers. Competition authorities in Europe have investigated RMFN clauses in e-commerce markets on grounds that they can foreclose competitors from the market, lead to collusion or soften competition amongst competitors. We present an assessment of RMFN clauses under Singapore’s competition law framework. We find that Singapore’s competition law can adequately deal with collusion and foreclosure concerns. However, the vertical agreement exemption in Singapore’s competition law may prevent the Competition Commission of Singapore (“CCS”) from sanctioning RMFN clauses that soften competition. We conclude from our game theoretic models that the softening of competition Theory of Harm (“TOH”) is unlikely to materialize. Our findings also contribute more generally to competition authorities’ enforcement priorities and tools involving RMFN clauses and the softening of competition TOH.