Most-Favoured-Customer Clause

A Most-Favoured-Customer Clause (MFC) is a contractual arrangement between company and customer that guarantees the customer the best price the company gives to anyone. The MFC prevents a company from treating different customers differently in negotiations.

Seller’s Perspective

Pros

• Makes you a tougher negotiator
• Reduces your customers’ incentive to bargain

Cons

• Makes it easier for a rival to target one of your customers
• Makes it harder for you to target one of your rival’s customers

Customer’s Perspective

Pros

• Allows you to benefit from any better deal subsequently offered to other customers
• Ensures that you’re not at a cost disadvantage relative to rivals
• Eliminates the risk of looking bad if other customers strike better deals

Cons

• When others have MFCs, it’s harder for you to get a “special” deal.