This post was first published in Clare Painter’s digital rights newsletter on 7 February 2017
Problematic “Most Favoured Nation” clauses are far from unique to Amazon – and often contradictory
It might sound obscure to focus on a single clause in a digital licensing agreement, but this particular one is of huge importance to publishers and authors alike.
‘”Most Favoured Nation” (MFN) clauses have been with us for many years. It’s by no means only Amazon who has been known to put them in their publisher contracts, although it was Amazon who hit the headlines in January after an investigation by the European Commission concluded that their ebook contracts “may” have violated anti-trust rules in the EU and abused its strong position in the ebook market – by putting these clauses in their agreements with publishers.
In reality, ebook vendors have been using MFN clauses for years, not only in consumer channels but for institutional sales as well. In our role as digital licensing agents, David Attwooll and I found that MFN clauses became a frequent and repetitive theme of our contract negotiations with ebook vendors of many hues. And it still continues.
MFN clauses are not all born equal: they can vary a great deal. Broadly, these are clauses which require the publisher to offer the vendor the very best terms they have available anywhere.
But it isn’t as straightforward as it sounds. Offering consumers the lowest possible price is by no means the only measure you might find in such clauses.
Some talk about discount terms, or attempt to compare widely disparate business models. MFN clauses might oblige publishers to reveal innovations introduced by competitors (thus breaching confidentiality clauses?!), even if innovations occur long after signature of the contract.
Publishers who attempt to follow all this can find themselves tied in knots, trying to compare online apples and digital pears. It’s long been clear that a legal challenge was a distinct possibility, either in the EU or elsewhere.
Amazon has offered not to enforce MFN clauses, but this is limited in scope: it’s only for 5 years and, since this originates with the European Commission, it’s unclear whether British publishers will continue to benefit after leaving the EU. Nevertheless I’m pleased things are beginning to move. These difficult clauses can be both burdensome and impractical.