• The Ubiquitous Most Favored Nations Clause: Old Wine in New Bottles
  • August 5, 2016 | Author: Michael M. Briley
  • Law Firm: Shumaker, Loop & Kendrick, LLP - Toledo Office
  • For literally centuries, buyers of goods and services have relentlessly attempted to impose upon sellers of those goods and services “Most Favored Nations” (“MFN”) or Competitor Parity clauses in their contracts: “Thou shalt not give my competitors a better deal, and if thou doeth, thou shall either grant unto me the same favor or answer to the axe.” In an apparent effort to satisfy procurement due diligence and what they may believe to be competitive parity, many modern buyer procurement officers have adopted this practice either in an effort to be thorough (i.e., to leave “nothing on the table”) or, perhaps sometimes, in an effort to avoid the hard work connected with their job description. Also, some buyers (particularly some very large ones) are just arrogant and cannot stand to even contemplate the idea that anyone else would get a better price. In any event, historically these provisions have been reluctantly accepted by sellers who either lack the market leverage to insist upon their removal or who simply have adopted the attitude that either the buyer will not actually enforce the provision or, alternatively, that no one will ever really care. Unfortunately, and albeit not commonplace, lawsuits to enforce these provisions have been brought and they are normally successful. However, several noteworthy lawsuits and governmental investigations have placed into question the legality and enforceability of MFN provisions, thus making them risky for buyers in certain circumstances. The efficacy as well as the legality of these provisions under the antitrust laws has recently come into serious question in the U.S., Canada and the E.U.