4.20.2010

MFN Clauses and Antitrust Issues

Courtesy of Omar Khayat:

Although this article was written a few years ago, it sheds some light on the interaction of MFN clauses and antitrust violations that is still true today.

Excerpt:
"While MFN clauses may be under the microscope, other experts wonder if some companies that own online services—especially those that drive hardware or advertising revenue by selling downloads—are anticompetitive by effectively setting a ceiling on music's wholesale price.
...
Simply setting the same prices by following an industry leader is not unlawful as long as prices are set independently. But setting prices can become unlawful when combined with something else—a 'plus factor,' Boies says. A contractual provision that binds an industry together in some way—such as an MFN clause—could be that plus factor, he adds.

Another factor could come into play when a seller with an MFN clause wants to know if the buyer is complying with that clause, even though competitors' contract terms and sales information are confidential. It is the 'wanting to know' how competitors price their products or 'wanting to verify' equal rates that could trigger an antitrust violation, Boies says."

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