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Most favored nation clause

A most favored nation clause is a seller's promise to treat a buyer on terms no less advantageous than the terms on which it deals with other buyers, so the price in one contract gets set by reference to deals with third parties. The clause can reach non-price terms too, including product access and product quality, which is why it has to say which terms it covers. Antitrust exposure rises with the share of the seller's sales the clause locks up: the DOJ and FTC assess these clauses case by case, and about 20 states ban them outright in health care contracts. Drafting decides whether the clause can be administered at all, because an undefined comparator set turns every third-party deal into an argument.

Reviewed by

Brent Farese

Ex-General Counsel & CEO

August 6, 2026

Sample most favored nation clause for commercial contracts

A balanced, mutual starting point that reflects the market postures above.

Supplier warrants that the fees payable by Customer for each product listed in Exhibit A are no higher than the fees Supplier charges any Comparable Customer for the same product. "Comparable Customer" means a customer that purchases the same product in [territory] under a subscription of the same or shorter term, at an annual committed volume within [X] percent of Customer's annual committed volume. Affiliates of Supplier and affiliates of any customer are excluded from the comparison.

If Supplier charges a Comparable Customer a lower fee for the same product, Supplier shall reduce Customer's fee for that product to the lower fee for the remainder of the then-current term, effective from the first day of the billing period after Supplier identifies the lower fee or Customer establishes it. Supplier owes no credit, refund or other retroactive adjustment under this Section.

This Section does not apply to: (a) promotional or introductory pricing offered for [X] days or less; (b) one-off or spot transactions; (c) pricing offered as part of a bundle with other products or services; (d) pricing set by a volume tier or committed spend outside the band in the definition of Comparable Customer; (e) transactions with Supplier's affiliates; and (f) pricing offered to a government or public-sector purchaser or under a public procurement framework.

Within [30] days after each anniversary of the Effective Date, an officer of Supplier shall certify to Customer that Supplier has complied with this Section. Supplier is not required to disclose the identity of any customer or the terms of any third-party agreement. This Section applies during the initial term and does not survive expiration or termination of this Agreement.

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Findings from public most favored nation clause studies

This section reports the regulatory and enforcement record rather than clause-structure percentages. No public dataset measures how often most favored nation clauses appear in commercial contracts, and no study with a disclosed denominator reports what those clauses contain. Competing pages fill that gap with percentages that carry no sample and no method. Aline does not.

The two counts below come from a peer-reviewed study and from the antitrust agencies' own filing, and each states its population. A reader holding an MFN wants to know whether the clause is lawful and what it will cost to administer, so that is what this page answers.

Most favored nation clause mistakes that create enforcement risk

The clause promises better terms than any other customer gets and never says which customers count. Nobody can tell whether a given third-party deal is comparable, so each side argues about the comparison instead of applying the clause.

The adjustment runs backwards with no look-back limit. The seller signs an open-ended repayment obligation whose size depends on deals it has not made yet, which nobody can price at signing.

Verification asks for the wrong thing. A right to inspect third-party contracts hands the MFN holder competitively sensitive pricing from its rivals' suppliers, and Georgia's insurance rule treats a rate-disclosure requirement as part of the MFN problem rather than as a cure for it.

Nobody sized the coverage. When the MFN holder buys a large share of the seller's output, the clause makes any discount to a rival expensive and can foreclose that rival or block a new entrant. The DOJ and FTC weigh three factors: the volume of sales the clause protects, the size of the potential discount and the probability of enforcement.

The parties treated the clause as pricing hygiene and missed the coordination theory. A discount to one counterparty becomes a revenue loss across the book once other contract prices reset, which reduces the incentive to undercut a coordinated price. The agencies also recognize the pro-competitive use, protecting relationship-specific investment against discounting opportunism, and they assess each clause case by case.

Nobody checked the sector. In a regulated market the clause can be void by statute or regulation without any antitrust analysis. Georgia's rule states that "an agreement between an insurer and a provider shall not include a most favored nation clause or an upper limit trigger clause".

How to negotiate a most favored nation clause

Questions about most favored nation clauses

What is a most favored nation clause?

A most favored nation clause, also called a parity or price-protection clause, commits a seller to give one buyer terms no less favorable than it gives other buyers, so that buyer's price gets set by reference to third-party deals. The DOJ and FTC note that these clauses often relate to price but can also govern non-price terms such as product access or product quality, so the clause has to say which terms it covers.

Are most favored nation clauses legal?

In the United States they are not unlawful in themselves. The DOJ and FTC assess them case by case, and say that clauses covering insignificant portions of a market are apt to be benign or pro-competitive. Specific markets are different: about 20 states ban MFN clauses in health insurer and provider contracts, and EU rules restrict parity clauses in platform distribution. Legality turns on your sector, your jurisdiction and your market position, so ask counsel before you rely on the clause.

Do most favored nation clauses create antitrust risk?

Yes, and the risk scales with coverage. When the MFN holder buys a large share of the seller's output, the clause penalizes any discount to a rival, which can foreclose that rival or block a new entrant. It can also stabilize a coordinated price, because a discount to one counterparty becomes a revenue loss across the seller's book once other contract prices reset. At least nine federal enforcement actions between 1994 and 2010 challenged such clauses. Risk depends on market coverage and effects rather than on the wording alone, so size the coverage before you sign.

How common are most favored nation clauses?

Nobody knows. No public study with a disclosed denominator measures MFN prevalence in any commercial contract population, and the percentages circulated online come from sources that publish no sample, no method and no author. Contract-clause search tools return large hit counts for MFN language, but a hit count over an undisclosed corpus cannot become a percentage. Aline would rather say that than publish a number it cannot stand behind.

What is the difference between a wide and a narrow parity clause?

A wide parity clause bars the seller from offering better terms on any other channel, including rival platforms. A narrow one bars better terms only on the seller's own direct channel. EU law treats wide across-platform retail parity as an excluded restriction under Article 5(1)(d) of the Vertical Block Exemption Regulation, Article 5(3) of the Digital Markets Act prohibits parity obligations on business users of designated gatekeepers, and the Court of Justice held in Case C-264/23 that hotel platform parity clauses, wide and narrow, do not escape Article 101(1) TFEU as ancillary restraints. This vocabulary comes from platform distribution rather than from general US doctrine.

Which states restrict most favored nation clauses?

As of August 2020, 20 states restricted MFN clauses in at least some health care contracts and 19 banned them outright in at least some contracts. Those statutes cover insurer and provider contracts, not commercial contracts in general. Georgia's rule is representative: "An agreement between an insurer and a provider shall not include a most favored nation clause or an upper limit trigger clause." A clause can fail for a second reason as well, because its own drafting leaves the comparator set, the remedy or the verification undefined.

How should you define the comparator set in a most favored nation clause?

Name it in the clause. State which customers count, which volume tiers, which territories and which products, and say whether affiliates are included. An MFN that does not define its comparator set invites a dispute over whether a given third-party deal is comparable at all, which makes the clause hard to enforce for either side. A tighter comparator set also cuts the share of the seller's sales the clause covers, which lowers the antitrust exposure. No public source reports how comparator sets get drafted, so treat this as your decision rather than a market rate.

Should the most favored nation adjustment be retroactive?

Fix the answer in the contract instead of leaving it open. A retroactive MFN with a true-up or refund creates a repayment exposure whose size is unknown at signing, because it depends on deals the seller has not made yet. If the parties want a retroactive remedy, state the look-back period, whether the correction is a credit or cash, and the deadline for claiming it. No public source reports how often MFN clauses run retroactively.

How does a buyer verify most favored nation compliance?

Two mechanics do the work: a periodic certification from an officer of the seller, or an audit limited to the MFN calculation. Design matters here, because regulators have treated a requirement that the seller disclose third-party rates to the MFN holder as part of the competitive problem. In one DOJ case the agency alleged the insurer "aggressively enforced its MFR clause through repeated hospital audits resulting in millions of dollars in penalties over the years", so the audit route carries real money. Keep customer identities and third-party terms out of whatever you agree.

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20 of 50 states restricted most favored nation clauses in contracts between health care providers and insurers as of August 2020, and 19 of those banned the clauses outright in at least some health care contracts. These are health insurance statutes: no state restricts MFN clauses in ordinary commercial supply, SaaS, procurement or licensing contracts. Source: Arnold, Gudiksen, King, Fulton and Scheffler, Milbank Quarterly, 10 May 2022, Table 1.
At least 9 federal antitrust enforcement actions between 1994 and 2010 challenged most favored nation or parity clauses as the restraint at issue, 8 brought by the Department of Justice and 1 by the Federal Trade Commission. Source: DOJ and FTC, OECD submission DAF/COMP/WD(2015)72, 16 October 2015.

What the record shows, and what nobody has measured

The regulatory trend predates the recent statutes. Eleven states restricted MFN clauses in health care contracts before 2010, and eight more banned them between 2010 and 2016, starting with Massachusetts and Ohio.
Six of the nine counted federal actions targeted health care payers, which is why the statutory bans are insurance statutes rather than general contract law.
Scale, in one case: the DOJ alleged that Blue Cross Blue Shield of Michigan used most favored nation or similar clauses with at least 70 of Michigan's 131 general acute care hospitals. That allegation was never tried. The DOJ dismissed the case in March 2013 after Michigan passed a statutory ban effective 1 January 2014.
An MFN can demand better than equal treatment. In the Michigan case the DOJ alleged MFN-plus terms requiring hospitals to charge the insurer's competitors 30 to 40 percent more, and 15 to 30 percent more in the Ohio case.
Audit rights carry real money. In the Ohio case the DOJ alleged the insurer "aggressively enforced its MFR clause through repeated hospital audits resulting in millions of dollars in penalties over the years".
Regulators can price the harm. The Milbank study estimated that a 2010 ban across all 174 metropolitan areas with highly concentrated insurer markets would have left 2016 hospital prices $472, or 2.8 percent, lower, worth about $2.4 billion a year.
In the European Union the line runs through wide versus narrow parity. Article 5(1)(d) of the Vertical Block Exemption Regulation excludes wide across-platform retail parity from the block exemption, Article 5(3) of the Digital Markets Act bars parity obligations on business users of designated gatekeepers, and in Case C-264/23, decided 19 September 2024 the Court of Justice held that hotel platform parity clauses, wide and narrow, do not escape Article 101(1) TFEU as ancillary restraints.
Four EU Member States have banned parity clauses in hotel booking contracts by statute, and Germany reached the same outcome through competition enforcement. Aline is not publishing the enactment dates as a benchmark, because they rest on practitioner commentary rather than on the statutes.
Bans have not always changed behavior. The Commission's 2022 market study found that the Austrian and Belgian laws banning wide and narrow parity clauses "do not appear to have led to material changes in hotel distribution practices, relative to the other Member States covered by the study".
Counterparties often do not know what their parity terms say. In the EU authorities' 2016 hotel monitoring exercise, 47 percent of responding hotels did not know that Booking.com and Expedia had changed or removed their parity clauses. That exercise questioned 16,000 hotels and received 1,600 replies, a response rate of about 12 percent, so read it as self-reported behavior in one sector rather than as clause measurement.
Clause breadth changes conduct. After the switch from wide to narrow parity, 79 percent of those responding hotels reported no price differentiation between online travel agencies and 69 percent reported none on availability, while the authorities' analysis of metasearch room prices found more price differentiation in eight of the ten participating Member States.
Six drafting properties have no published frequency at all: whether the clause covers price only or other material terms, whether the adjustment runs retroactively or forward, how the comparator set is defined, what verification the clause grants, which carve-outs it names, and whether it survives the initial term. Treat each as a decision you have to make rather than a market rate you can look up.

Method note. The two cards count different things and cannot be added. Card one counts states. Its source is an econometric study whose own outcome variable was hospital admission prices; the card draws on the Table 1 census of state MFN restrictions rather than on the price finding, and that census covers health insurer and provider contracts as of August 2020. Card two counts federal enforcement actions filed between 1994 and 2010. The agencies introduce their own list with "see, e.g.", so nine is a floor and the card says "at least". One of the nine, Oregon Dental Service, comes from the Antitrust Division's 1996 health care enforcement update rather than from the OECD note, and the count excludes private suits, standalone state actions, and cases where an MFN was one instrument of a wider conspiracy, including the Apple e-books litigation.

The EU hotel percentages come from a questionnaire with a response rate of about 12 percent in one sector. They measure self-reported behavior after a regulatory change and never measure clause content, so the response rate travels with every figure from that report. Contract-clause search tools return large hit counts for MFN language, but a hit count over an undisclosed corpus has no denominator and cannot become a percentage. The four EU national hotel bans appear without dates and without a card, pending verification of each statute.

Public sources.

Antitrust risk depends on your market position and your jurisdiction, so a position that is unremarkable for a small buyer can be a serious problem for a dominant one.

Every row below is a drafting position, not a survey result, and no public source supports a market norm for any of these properties. Antitrust exposure depends on your market position and your jurisdiction, and the agencies publish no numeric safe harbour.

Issue	Market posture	Reasonable fallback	Push back hard
Scope of terms covered	Say whether the clause covers price only or price plus named other terms, and list the terms it reaches	Extend beyond price only to terms you can measure, such as payment terms or committed service levels	An MFN on all terms and conditions, which makes every third-party contract a compliance question
Comparator set	Name the comparator: which customers, which volume tiers, which territories, which products, and whether affiliates count	Use a defined customer class with a volume band around the buyer's own commitment	"Any other customer" with no class, tier or territory limit
Retroactivity and remedy	State whether the correction is prospective or retroactive, the look-back period, whether it is a credit or cash, and the deadline to claim it	A credit applied prospectively from the next billing period, with a short stated look-back	An unlimited retroactive refund obligation with no look-back period and no claim deadline
Verification	Agree the mechanic up front: a periodic officer certification, or an audit limited to the MFN calculation	An independent accountant reviewing the calculation and reporting only compliance or the delta	Open access to third-party contracts, customer identities or competitor rates
Carve-outs	Name the carve-outs in the clause: promotions, one-off or spot deals, volume and tier pricing, bundles, affiliate transactions, and government pricing	Trade a shorter carve-out list for a tighter comparator set	Silence on carve-outs, which leaves each exception to argument after the fact
Duration and survival	State the term: whether the MFN applies during the initial term only, and whether it survives renewal or termination	Survival for a stated number of months tied to a specific transition need	An MFN that survives termination with no end date
Antitrust review	Before signing, estimate what share of the seller's relevant sales the clause covers, and check whether the sector restricts MFN clauses by statute, including US health insurer contracts in about 20 states and EU hotel booking contracts	Cut coverage by narrowing the comparator set and the product list, which lowers both the exposure and the administration burden	An MFN covering a large share of a seller's output where the holder is the seller's dominant channel, and any MFN in a sector that bans it