Most Favoured Nation provisions increasingly investigated by European Competition Authorities

Most Favoured Nation ("MFN") provisions have come under increased scrutiny of European competition authorities. MFN provisions, also referred to as "price parity clauses", are clauses in which a party extends to its counterparty the most favourable contractual terms it grants to any third party.

MFN clauses are most likely to produce anticompetitive effects where at least one contracting party possesses market power. Furthermore, anticompetitive effects are more likely to be expected in transparent markets with relatively homogeneous products.

In September 2010, the UK Office of Fair Trading ("OFT") opened an investigation into allegedly anticompetitive agreements between hotels and online travel agents. In July 2012, the OFT issued a statement of objections alleging that both Expedia and Booking.com had concluded agreements with InterContinental Hotel Group ("IHG") that contained MFN clauses which prevented the travel agents from offering hotel rooms at a lower rate than the rate determined by IHG.

The OFT alleged that these agreements were anticompetitive by nature as they could hamper price competition between online travel agents and the hotel's own online platforms and bar new agents from either entering the market or expanding their market share by providing discounted accommodation. The three companies have now made a joint proposition with legally binding commitments to address the concerns of the OFT. On the basis of these commitments online travel agents would inter alia be free to offer rooms at discounted rates. The OFT has issued a notice with intention to accept the commitments. The OFT's final decision is expected in December 2013.

In February 2013, the Bundeskartellamt ("BKA") conducted an investigation into online retailer Amazon. On its Marketplace platform, Amazon enforced an MFN policy prohibiting retailers from offering products through any other online sales channel cheaper than they sell on Amazon Marketplace. The BKA had concerns that Amazon's policy limited retailers too much in determining their price and hampered competition between online marketplaces. Retailers pay online marketplace operators a percentage of the price of their product. The MFN clause would limit retailers in translating an operator's better terms into a better price for the consumer. This would make it more difficult for operators to attract new retailers.

On 27 August 2013, Amazon announced that it will abolish its MFN policy. The German Competition Authority will now assess whether Amazon's policy change is sufficient to terminate proceedings against Amazon. The UK OFT, which had also started an investigation into Amazon, has welcomed Amazon's policy change.

In December 2011, the European Commission launched proceedings against publishers of e-books Simon & Schuster, HarperCollins, Hachette, Holtzbrinck/Macmillan, Penguin and Apple. The reason was the joint switch from wholesale to agency contracts with retailers, which contained the same key terms including a MFN clause. The Commission suspected a common strategy aimed at increasing, or preventing the decrease of, e-book prices on a global scale. In December 2012, the European Commission accepted binding commitments from four publishers and Apple and in July 2013 also from Penguin. In one of the commitments, the undertakings pledge to refrain from including MFN clauses in agreements with retailers.

The US Department of Justice also conducted an investigation into agreements between Apple and these publishers, ending on a trial which found that Apple conspired with the publishers to raise e-book prices, inter alia by using MFN clauses.