A most-favored-nation ("MFN") clause was at the center of a U.S. District Court decision finding that Apple, Inc. had violated antitrust laws by conspiring with five major book publishers to eliminate retail price competition. Apple was found to have persuaded the publishers to switch from a wholesale pricing model - under which the publishers sold e-books to retailers at a wholesale price and the retailers set the retail price - to an agency pricing model - under which the publishers set the retail prices (subject to certain price caps).
As part of the switch to the agency pricing model, the publishers agreed to a MFN clause with Apple. Under the MFN clause, the publishers' retail prices in Apple's e-bookstore were required to match the lowest price for the same e-book offered by other retailers. The MFN clause resulted in the publishers seeking more control over the retail price of e-books. The publishers were found to have engaged in a group boycott whereby e-books were withheld from retailers until agreement was reached to switch to an agency pricing model.
The court found the MFN clause at issue to be a "severe financial penalty" which effectively forced the publishers to eliminate retail pricing competition and replace their existing retail pricing model with the agency pricing model. The court ruled that the actions of Apple and the publishers constituted a per se unlawful conspiracy to fix and raise retail prices in violation of the Sherman Antitrust Act.
U.S. v. Apple, Inc., No. 12 Civ. 2826 (S.D.N.Y. July 10, 2013)