Most-favored-nation clauses in commercial contracts: legal and economic analysis and proposal for a guideline

Gönenç Gürkaynak, Ayşe Güner (), Sinan Diniz and Janelle Filson
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Gönenç Gürkaynak: ELIG, Attorneys-at-Law
Ayşe Güner: ELIG, Attorneys-at-Law
Sinan Diniz: ELIG, Attorneys-at-Law

European Journal of Law and Economics, 2016, vol. 42, issue 1, No 7, 129-155

Abstract: 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.

Keywords: Most favored nation clause; MFN; Most favored customer clause; MFC; Best price clauses; Price parity clauses (search for similar items in EconPapers)
JEL-codes: K21 L41 L42 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10657-015-9515-y

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