What It Does
A most favored nation (MFN) clause is a contractual provision that guarantees one party terms no less favorable than the other party offers to any comparable counterparty. Borrowed from trade law, it is common in commercial pricing, procurement, licensing, and investment agreements: if the provider later gives a better price or term to someone comparable, the MFN-protected party receives it too. The clause turns on how "comparable" is defined, which terms it covers, and whether the benefit is automatic or requires notice. Courts enforce MFN clauses, though disputes over scope are common.
Guarantees one party terms at least as favorable as those given to comparable counterparties
Defines the comparison set: who counts as comparable, and over what period
Specifies which terms are covered: price only, or price plus other commercial terms
Sets whether the better term applies automatically or on notice and election
Allocates the ongoing risk of being undercut for the life of the contract
Broad price MFNs have drawn antitrust scrutiny, because they can reduce a provider's incentive to discount, pushing drafters toward narrower and clearly defined comparison sets.
When You'll See It
A most favored nation clause appears wherever one party fears being undercut over time: SaaS and software pricing, procurement and supply agreements, licensing deals, and investor and financing terms. In-house teams meet it on both sides, demanding it as a buyer and resisting it as a seller. It matters most in long-term or renewing relationships, where the provider will sign other deals during the term. See also: exclusivity, pricing, and change of control.
Examples
Equinix, Inc.
Oklo Inc., Power Purchase Letter of Intent
Commercial pricing
One-Sided
2024
“During the term of any PPA, Oklo will offer its power (including equipment and services) to us at the Most Favored Nation Pricing (as defined below).”
Complete Solaria, Inc.
Polar Multi-Strategy Master Fund, Contract Amendment
Investor MFN
Mutual
2024
“In the event the Company enters into other similar agreements with any other investor before or after the execution of this Amendment in connection with the modification of the EPFT Contract, Company represents that the terms of such other similar agreements are not materially more favorable to such other investors thereunder than the terms of this Amendment are in respect to Seller.”
Verizon Sourcing LLC
Synchronoss Technologies, Inc., Application Service Provider Agreement (Amendment)
Supplier-pricing MFN, comparable-customer benchmark
One-Sided
2023
“Most Favored Pricing. Supplier represents that the prices ([]) that Supplier charges Verizon under this Section 4 when considered together with all other material terms impacting the costs of providing products and services hereunder shall be no less favorable than those provided by Supplier to any Comparable Supplier Customer, at similar volume levels...”
Blue Star Foods Corp.
JustFoodForDogs, LLC, Supply Agreement
Product-supply MFN, automatic true-up
One-Sided
2023
“Most Favored Pricing. If Supplier offers any more favorable term or condition (including pricing) to any other company than that which is offered to Customer for the Products or any products similar thereto then Supplier will extend such favorable terms or conditions to Customer, and this Agreement and any applicable Purchase Orders will be deemed amended to provide those terms and conditions to Customer.”
Negotiate
You want the protection
Define the comparison set broadly enough to capture the deals that matter, and specify the look-back and look-forward periods.
Cover all material commercial terms, including more than price, so the provider cannot route the benefit around you.
Make the better term apply automatically, with an audit right to verify compliance.
Require the provider to notify you when it grants a more favorable term.
Keep the clause alive through renewals.
You want to limit it
Narrow the comparison set to truly comparable customers by volume, term, and segment.
Limit covered terms to headline price, and exclude one-off discounts, pilots, and bundled deals.
Make the benefit apply on the buyer’s election going forward, with no retroactive true-up.
Add a sunset so the MFN expires before the contract does.
Exclude affiliates and strategic deals from the comparison.
An MFN is only as strong as its comparison set. A buyer who wins the clause but accepts a narrow definition of “comparable” has won very little.
Red Flags
A comparison set so narrow that no other customer ever qualifies, making the clause cosmetic.
Coverage of headline price only, letting the provider shift value into fees, credits, or bundles.
No audit or notice right, so the buyer cannot tell whether the MFN is being honored.
A broad price MFN that raises antitrust exposure in regulated or high-share markets.
An MFN with no sunset that outlives the commercial logic of the deal.
FAQs
This content is for informational purposes only and does not constitute legal advice.
