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Most favored nation clause

By Gareth HoyleLast updated How we research

A most favored nation clause promises one party terms at least as good as those the other party gives anyone else.

A most favored nation clause is a contract term in which one party promises to give the other terms, usually price, at least as favorable as those it gives any other customer or supplier. The Legal Information Institute notes that the term comes from trade treaties and that such clauses operate similarly in domestic contracts.

How do MFN clauses appear in data licenses?

In a data license, a buyer may ask for a promise that no later buyer will pay less for the same data or receive better terms. If one does, the first buyer gets the lower price or better terms too. A seller may ask for the reverse in a revenue share: that the agent will not license the data more cheaply to others.

What are the risks?

An MFN clause can reduce what later buyers are willing to pay and requires the seller to track every later deal. US antitrust agencies have challenged some MFN clauses: in 2013 the Justice Department dropped its case against Blue Cross Blue Shield of Michigan after Michigan banned MFN clauses in health insurers' provider contracts.

Limit any MFN to the same data, the same field and a fixed period. See field of use restriction.

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