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The law and economics of most-favoured nation clauses

Francisco Enrique Gonzalez-Diaz and Matthew Bennett, Competition Law & Policy Debate, Volume 1, Issue 3, August 2015

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Most favoured nation clauses (“MFNs”) , i.e., agreements whereby a seller agrees that a buyer will benefit from terms that are at least as favourable as those offered by the seller to any other buyer,1 have come under scrutiny in recent years in the European Union (“EU”), the United States (“US”) and beyond. Whilst the main focus of this scrutiny has been initially on the so-called wholesale MFNs, there has been a growing interest in cases involving ‘retail price’ MFNs. In these cases the MFN agreement references the end retail price rather than the wholesale price that traditional MFNs refer to. Although since the E-Books case (a “retail MFN” case), which was settled in 2013,2 the European Commission (“the Commission”) had not assessed the competitive impact of MFNs, it has recently opened a formal antitrust investigation into certain business practices carried out by Amazon in the online distribution of books. In particular, the Commission is investigating whether certain clauses included in Amazon’s contracts with publishers, which through different means ensure that Amazon, is offered terms at least as good as those offered to its competitors, are compatible with EU competition law. Similar MFNs, such as those included into contractual provisions for online hotel reservation services, have also been scrutinised by certain national competition authorities (“NCAs”) of the EU. In addition, both the German and the UK authorities have taken issue with Amazon’s “price parity” policy and the United Kingdom’s Competition Markets Authority (“CMA”) has recently opened an investigation into MFNs relating to motor insurance price comparison websites. Despite this relatively recent interest, there does not appear to be clear guidance at either EU or national level as to how to assess MFNs from a competition law perspective, specifically with regard to MFNs that reference the retail price rather than the wholesale price. This article aims at providing a broad frame of reference for analysing this type of clauses, based on the case-law and practice of the European Courts and the European Commission.

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