Abstract
The prevalent use of “most favored nation” (MFN) clauses in commercial agreements has garnered significant attention in the economics and legal literature and by practitioners and enforcement agencies. From an antitrust standpoint, there is a strong consensus that while MFN provisions can lead to procompetitive outcomes or at least play a competitively neutral role, they may also result in competitive harm and a loss of consumer welfare. Therefore, US and EU enforcement agencies and courts have held that MFNs should be reviewed on a case-by-case basis, considering the specific characteristics of both the contractual provision and the industry. While a case-by-case approach is valid, it is not ideal from a variety of standpoints: that of the competition authorities seeking to make best use of their limited resources and that of practitioners seeking to advise their clients. Accordingly, published guidelines on the use of MFNs, containing presumptions and safe harbors, would be both efficient and useful. The paper argues that it would increase the efficiency and accuracy of antitrust enforcement if one of the leading competition authorities issued MFN guidelines. The paper suggests a set of presumptions and safe harbors that should be included in any such guidelines.
Highlights
The prevalent use of ‘‘most favored nation’’ (MFN) clauses in commercial agreements has garnered significant attention in the economics and legal literature and by practitioners and enforcement agencies
There is a strong consensus that while MFN provisions can lead to procompetitive outcomes or at least play a competitively neutral role, they may result in competitive harm and a loss of consumer welfare
This paper argues that competition authorities seeking to make the best use of their limited resources and the available evidence, and practitioners seeking to advise their clients in the most effective manner, would benefit from a guideline that sets out the different forms of MFNs along with guidance in terms of presumptions and safe harbors regarding circumstances in which MFNs are more or less likely to lead to anticompetitive harm from the point of view of the enforcement agency
Summary
The US and European enforcement agencies have so far reviewed MFNs on a caseby-case basis. While the above language notes the RPM-related competitive concerns arising out of a supplier obliging the buyer to apply a MFC clause, it does not shed any light on the treatment of the use of MFN clauses in and of themselves It has been suggested by the German Federal Cartel Office (‘‘FCO’’) that MFNs could potentially be considered within the scope of Article 4(a) of the VBER concerning resale price maintenance, and as a hard-core restriction that does not benefit from the block exemption, though this was left open An alternative could be that the vertical exemption regulation could be amended to clarify the recent case law on the MFNs and take a position on the types of MFNs that would be exempt by the vertical block exemption regulation, and distinguish cases, such as, for example, MFN-plus arrangements, that may not benefit from the block exemption
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