Agreement Most Favoured Customer

On July 20, 2011, American Airlines announced an order for 460 narrow-bodied aircraft, including 260 Airbus A320s. [1] The order broke Boeing`s monopoly with the airline and forced Boeing to the 737 MAX.[2] Since the sale contained a “most favoured customer clause”, the European aircraft manufacturer must refund a difference to American if it sells to another airline at a lower price, so that Airbus cannot give its competitor United Airlines a competitive price and will sell a crooked Boeing fleet to it. [3] MFC (sometimes called “Most Favored Nation,” Preferred Customer or Price Warranty) is an internal price comparison with other supplier customers. MFC requires the supplier to offer the customer the best price the company offers to any other customer for the product or service. “price uniformity” refers to a term that refers to cases where prices remain higher and are more resistant to changes than they can be when there has been no MFC clause. In these cases, suppliers have less incentive to negotiate pricing with customers on an ongoing basis, as the MFC clause increases the costs associated with these negotiations by requiring them to offer the new prices to each customer who is subject to the most preferred customer clause. Over the past two years, the most customer-friendly clauses have grown in importance in the two main systems of agreement. Within the European Union, this took the form of a little-respected but potentially significant agreement with the Hollywood majors, who regulated their investments in new film equipment. In the United States, litigation over the most favoured customer clauses of a major health insurer, Blue Cross Blue Shield of Michigan, continues to make headlines.

The approach taken in these cases can have a significant impact on the multiplicity of contracts that currently apply the clauses of the most favoured clientele. This contribution argues that the concerns expressed in the latter cases largely disappear, taking due account of market power and consumer welfare criteria. In essence, the way in which the customer`s most favoured clause is implemented may lead to it operating in a way that can be considered anti-competitive. You might think that a recipient customer, who uses their purchasing power and forces suppliers to sell at lower prices, would produce a positive result for consumers. However, there is an error in this logic: the clauses may also provide that the recipient customer is delivered before any other customer in order to minimize delivery delays. This effectively creates a two-speed system for customers. Performance calibration is an external price comparison with the supplier`s competitors. The objective of performance calibration is to verify that its prices in long-term contracts will continue to be competitive, particularly in a market where prices for goods or services generally fall over time.

For example, the technology market, where prices for goods and services are falling, with new technologies rapidly replacing existing technology. Because the most important customers are better able to obtain the status of “most advantaged customers,” they work at the expense of smaller customers.