Most Favored Nation ("MFN") Pricing Draws Scrutiny As Potential Anticompetitive Practice

An interesting and growing debate in the antitrust arena is whether most favored nation ("MFN") pricing provisions are pro-competitive or anticompetitive. For many years, MFN provisions have been considered a fairly noncontroversial contract term included by purchasers in an attempt to assure that other buyers do not receive a more favorable price. But not all agree that MFNs result in lower prices, including some economists and, more importantly, the Department of Justice Antitrust Division ("DOJ"). The DOJ not only has expressed potential concerns about MFN clauses but also has filed several antitrust actions alleging that particular MFN clauses violate Sherman Act § 1 and cause anticompetitive effects. The challenge for businesses that prefer to include MFN clauses in their purchase agreements is to recognize when those clauses potentially raise antitrust risk.