Price discrimination by a supplier is permitted under the antitrust laws, subject to some limitations. Price discrimination is legal so long as it is conducted unilaterally by the supplier and not as part of a conspiracy in restraint of trade. Such discrimination is legal where the supplier is not abusing a dominant market position (under European Union competition law) or abusing a monopoly power (under U.S. antitrust laws). Such discrimination is legal under the Robinson-Patman Act where there is no sale of goods, but only of services.
The “Look Back” Clause
So how can the enterprise customer assure itself that it is not suffering from price discrimination? An analogue of the “most favored nation” (“MFN”) clause in intergovernmental treaties of friendship, commerce and navigation for over two centuries, the “most favored customer” (“MFC”) clause defuses this discrimination by giving a second look. If the contract price is higher than what the service provider charges to other enterprise customers, the look-back should result in a discount or rebate. The “look back” clause measures the price discrimination as of the date of the contract.
The Future Discrimination Clause
The “future discrimination” clause looks not only at the date of the contract, but any future time during the contract term. At this point, the fairness of the “MFC” clause encounters disparities in contract terms or market conditions between the contract date and the future date. Those terms might involve different risk allocations, different locations and different conditions of service.
MFC clauses therefore need careful discussion as to suitability and terms.