Most Favored Nation Clause License Agreements

The exclusionary effects of retail MFNs are indirectly supported by the dynamics of multilateral markets, where they are often used. Multi-party markets are characterized by indirect network effects in which the platform operator`s demand depends, on the one hand, on the number of users on the other (Samuelson et al. 2012, p.1). The existence of indirect network effects is intended to make it more difficult to enter the market and thus to create structures that are highly concentrated in multilateral markets. (OECD report, p.98, 115; Samuelson et al. 2012, p.1) In the same vein, Evans (2013) stresses the importance of achieving a “critical mass” of users for the viability of a platform. According to the author`s definition, “critical mass is the amount of demand on both sides that is sufficient to produce positive feedback effects” (Evans 2013, p.18). Platforms that reach this level are capable of triggering positive reactions that push them towards growth. However, “based on preliminary evidence, it appears that most new platforms fail to pass through this initiation phase” (Evans 2013, p.19). Crocker, K., Lyon, T. (1994). What facilitates “facilitation practices”? An empirical study of the most favored nation clauses in natural gas contracts. Journal of Law – Economics, 37 (2), 297-322.

The Commission`s attitude is particularly noteworthy, given that the AMF clauses were not anti-competitive. Indeed, in its press release on the preliminary inquiry, the Commission stated that “the justification for these provisions is to ensure that competitors (primarily the other major Hollywood film studios) contribute no less to the digital transition, while ensuring equal access to digital projection equipment in European cinemas” (Theater Digitalisierung 2011). Although the Commission took note of these pro-competitive effects, it considered that the potential effect excluding independent distributors was more urgent and called on the parties to review their contracts and remove the MFN clause. Samuelson, M., Piankov, N., Ellman, B. (2012), assessment of the impact of the most favored nation`s clauses, aba Antitrust Law Section 2012, www.analysisgroup.com/uploadedfiles/content/insights/publishing/samuelson_mfn_springaba_2012.pdf. Access to June 26, 2015. Complaints by federal and regional authorities about cartels and abuse of dominance have also been the subject of complaints from antitrust authorities. With respect to the use by firms with a significant market share, the provisions of the MFN are considered anti-competitive, as new or small businesses would erect barriers to entry and increase the operating costs of competitors. When many vendors enter into MFN agreements, they may be considered by antitrust authorities as agreements to keep prices high.