A Most-Favoured-Customer Clause (MFC) is a

contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

ual arrangement between vendor and customer that guarantees the customer the best price the vendor gives to anyone. The MFC prevents a company from treating different customers differently in negotiations. For example, on July 20, 2011,

American Airlines American Airlines, Inc. is a major airlines of the United States, major airline in the United States headquartered in Fort Worth, Texas, within the Dallas–Fort Worth metroplex, and is the Largest airlines in the world, largest airline in the ...

announced an order for 460 narrowbody jets including 260

Airbus A320 The Airbus A320 family is a series of narrow-body airliners developed and produced by Airbus. The A320 was launched in March 1984, Maiden flight, first flew on 22 February 1987, and was introduced in April 1988 by Air France. The first membe ...

s. The order broke

Boeing The Boeing Company, or simply Boeing (), is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, and missiles worldwide. The company also provides leasing and product support s ...

's monopoly with the airline and forced Boeing into the re-engined

737 MAX The Boeing 737 MAX is a series of narrow-body aircraft developed by Boeing Commercial Airplanes as the fourth generation of the Boeing 737. It succeeds the Boeing 737 Next Generation and incorporates more efficient CFM International LEAP engi ...

. As this sale included a "most favoured customer clause", the European airframer has to refund any difference to American Airlines if it sells to another airline at a lower price. Big box retailers such as

Wal-Mart Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corporation that operates a chain of hypermarkets (also called supercenters), discount department stores, and grocery stores in the United States and 23 other ...

and

Costco Costco Wholesale Corporation is an American multinational corporation which operates a chain of membership-only big-box warehouse club retail stores. As of 2021, Costco is the third-largest retailer in the world, and as of August 2024, Cos ...

often use their

monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...

power to demand MFC from their suppliers. In one anecdote recalled by Costco CEO Jim Sinegal, a frozen-food supplier to both Wal-Mart and Costco accidentally sent Wal-Mart's invoice to Costco by mistake, and as the invoice revealed that Wal-Mart received lower pricing on the same goods, Costco immediately terminated its relationship with that supplier.

Evaluation under competition law in EU and US

While it may appear that MFCs benefit consumers because prices are lowered, authorities increasingly argue that such clauses prevent the offer of lower prices elsewhere and make the market entry of competitive offers considerably more difficult because they prevent new entrants from offering products at lower prices. It thus prevents competition.

References

{{reflist Contract clauses Consumer protection law