The U.S. Department of Justice’s suit against Apple Inc. and five publishers of e-books focused attention on so-called Most Favored Nation (MFN) clauses. It also fostered confusion. Some commentators interpreted the decision to create greater antitrust risk for MFN clauses in general, but the clause at issue was not a conventional MFN clause at all. Upon analysis, it turns out that everyday MFN clauses adopted to serve legitimate purposes should not create undue antitrust risk, notwithstanding the United States v. Apple Inc. decision.
A Most Favored Nation provision is a commitment by one party to give the other party at least as favorable contractual terms as it gives any other counterparty. Traditionally, an MFN clause appears in a sales agreement and binds either the seller (“I promise to sell to you at the lowest price that I charge any customer”) or the buyer (“I promise to buy from you at the highest price that I pay any supplier”).
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