Friday, August 17, 2012

Federal Antitrust Agencies to Hold Workshop on "Most-Favored-Nation" Clauses

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

If you counsel clients on the use of most-favored nations clauses in contracts, then you might want to mark your calendar for a September 10, 2012, workshop on the topic. The workshop is jointly sponsored by the Department of Justice Antitrust Division and the Federal Trade Commission.

Most-favored nations or MFN provisions guarantee a customer that it will receive prices that are at least as favorable as those provided to other buyers of the same seller, for the same products or services. They may keep a supplier from giving more favorable terms to your rivals.

"MFNs can under certain circumstances present competitive concerns," the agencies said in the workshop announcement. "This is because they may, especially when used by a dominant buyer of intermediate goods, raise other buyers’ costs or foreclose would-be competitors from accessing the market. Additionally, MFNs can facilitate collusion and stabilize coordinated pricing among sellers."

MFN clauses are back on the radar of antitrust practitioners since the U.S. Justice Department and the Michigan Attorney General filed an antitrust complaint in October 2010 against Blue Cross Blue Shield of Michigan over its use of MFN clauses in contracts with hospitals. The case was the first Justice Department challenge to enjoin the use of MFN clauses in the health care industry in more than a decade. The government alleged that Blue Cross violated Section 1 of the Sherman Act through its use of two types of MFNs, which required a hospital to provide hospital services to Blue Cross’ competitors either at higher prices than Blue Cross pays or at prices no less than Blue Cross pays.

More recently, MFNs have come under scrutiny in the federal/state action against against Apple, Inc. and publishers for conspiring to fix the sales prices of electronic books or e-books. Under the terms of a proposed final judgment resolving the charges against three of the defending publishers, the publishers agreed to refrain from entering into MFN agreements with e-book retailers.

The agencies' all-day program will feature panels discussing economic theories concerning MFNs and why they are used, the legal treatment of MFNs, and industry experiences with MFNs, among other topics. According to the agencies, the program "will provide a forum for discussion of the evolution of economic and legal thinking on MFNs and their implications."

The workshop will take place at the FTC's satellite conference center at 601 New Jersey Ave., NW, Washington, DC from 9:00 a.m. to 5:30 p.m. ET on September 10, 2012.

The FTC and the Department of Justice also are accepting comments on MFNs until October 10, 2012.  Interested parties may submit public comments to

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