What's your best price?
By John Cassels
Suppliers are often faced with demands that they offer prices that are the same as, or lower than, the lowest price charged to other customers. These 'most favoured customer' clauses are often thought to be beneficial to competition and consumers. However, in a number of cases, the European Commission has ordered their removal and it is now clear that they can give rise to antitrust concerns in the EU:
- Opodo: one of the proposed features of this online travel agency (a joint venture established by nine European airlines) was that it would have access to the airlines' lowest fares made available to other online travel agencies. This created a risk of foreclosure on the travel agency market and the Commission ordered the removal of MFC status granted to Opodo by its airline shareholders.
- Hollywood studios: MFC clauses in agreements between Hollywood studios and European broadcasters entitled the studios to the most favourable terms agreed between a pay-TV company and any one of them. Following a Commission investigation, six of the studios dropped the MFC clauses from their agreements.
- E.On/Gazprom: MFC clauses that obliged Gazprom to offer similar conditions to E.On as it offered to E.On's competitors in Germany were removed from supply agreements following a Commission investigation.
- Universal/EMI: one of the conditions for approving this merger was securing a commitment not to include MFC clauses in Universal's favour in any new or renegotiated contracts with European digital customers for 10 years.
- E-books: the MFC clause provided that if a retailer other than Apple offers a lower price for a particular e-book, each publisher had to match that retail price in Apple's iBookstore, or refuse to sell to the other retailer. Following the Commission's investigation, commitments were given to remove the clause and not to enter into any other sort of MFC clause.
Determining whether MFC clauses give rise to antitrust risks will depend upon factors such as: market structure (e.g. number of participants and barriers to entry); whether the parties involved have market power; and the nature of the MFC clause (e.g. price match or price beat).
If you would like more information about MFC clauses, please do not hesitate to contact John Cassels at email@example.com.