Apple Ruling Heaps Doubt on 'MFN' Clauses

Guaranteeing the lowest price doesn't necessarily lead to lower prices—at least as far as a handful of federal courts are concerned.

In the latest example, a federal judge ruled last week that the price-matching provision in Apple's contracts with five major book publishers was part of a conspiracy to fix e-book prices. The contracts required the publishers to give the technology giant's iTunes store the best deal in the marketplace on e-books. Other courts have taken a similarly dim view of these so-called most-favored-nation clauses, which take their name from a longstanding principle of international trade and are common in industries ranging from health care to television to financial services. But the finding by U.S. District Judge Denise Cote in the Apple case was especially significant because it was made following a trial, rather than in pretrial proceedings.

"Defendants in antitrust cases have liked to have the sound bite that no court has found an MFN to be anticompetitive," said Mark Botti, a former Justice Department antitrust lawyer now in private practice. "They can no longer say that."