Policymakers Focus on Most Favored Nation
FTC, DOJ testify on Most Favored Nations.
We have already seen activity in 2013 on the reform of Most Favored Nation clause policy. Most Favored Nation (MFN) or customer clauses have been described by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) in previous writings as: “The most commonly used MFN provisions guarantee a customer that it will receive prices that are at least as favorable as those provided to other buyers of the same seller, for the same products or services. Although at times employed for benign purposes, MFNs can, under certain circumstances, present competitive concerns. This is because they may, especially when used by a dominant buyer of intermediate goods, raise other buyers’ costs or foreclose would-be competitors from accessing the market. Additionally, MFNs can facilitate collusion and stabilize coordinated pricing among sellers.”
ASA sent a letter last year to the assistant attorney general for the Antitrust Division at the U.S. Department of Justice, asking for a review of the MFN clauses used in many property and casualty direct repair agreements. The letter emphasized the potentially harmful, anticompetitive impact of these clauses on consumers and collision repair shops.
The state of Michigan’s governor recently signed legislation, Senate Bills 61 and 62, prohibiting MFNs in health insurer contracts. The legislation did not address property and casualty insurers. Michigan’s new MFN law follows an earlier lawsuit, involving the U.S. Department of Justice and Blue Cross Blue Shield of Michigan, that attempted to address MFN clauses and the health insurer.
Recently the U.S. Senate Judiciary Committee’s SubcomÂmittee on Antitrust, Competition Policy and Consumer Rights held a hearing on “Oversight of the Enforcement of the Antitrust Laws.” Sen. Amy Klobuchar (D-Minn.) is chairwoman of the subcommittee. Newly appointed Assistant Attorney General for Antitrust William J. Baer and Federal Trade Commission Chairwoman Edith Ramirez testified at the subcommittee hearing on Capitol Hill.
Baer highlighted the Department’s interest in public policy related to MFN clauses. “One area of focus for us and for the FTC is so-called “most favored nation clauses” (MFNs). Such provisions potentially distort the competitive process by raising the costs of health insurance and hospital services, preventing other insurers from entering the market, and discouraging discounts. This combination of enforcement and public discussion has shined a spotlight on the problems MFNs can cause, leading a number of states to take a hard look at these practices: On March 18, 2013, the state of Michigan enacted a statute to ban the use of MFNs in health care provider contracts, becoming the latest in a growing list of states that statutorily restrict or prohibit such provisions.”
Ramirez also emphasized the FTC’s focus on MFN policy in her testimony: “The agencies recently co-hosted two workshops: one exploring the antitrust implications of most-favored-nation clauses and … another exploring the impact of patent assertion entities. The Commission understands the special obligation of the law enforcement agencies to speak with one voice whenever possible in important areas of U.S. antitrust policy, and to work in tandem to promote the interests of American consumers.”
ASA participated in the joint DOJ-FTC MFN workshop noted by Ramirez. ASA is working with both state and federal policymakers to address collision repairers’ concerns with MFN clauses. These clauses have increasingly become an issue for both consumers and repairers when included in property and casualty insurer-repairer agreements.
To view more about the U.S. Judiciary Committee antitrust hearing or Michigan’s new MFN law, go to www.TakingThe Hill.com.
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