Playing Favourites: The Competition Effects of Preferred Customer Arrangements

"Competition regulators appear to be paying increasing attention to the possibility that quite commonplace commercial arrangements between suppliers and their customers may have adverse implications for competition. The OECD, for example, has held two Best Practice Round Table sessions on loyalty schemes, including volume discounts, in recent years, and numerous articles on loyalty programmes and discounts have appeared in the literature. Two very common arrangements that confer apparent benefits upon a particular customer (or group of customers) are most favoured customer (MFC) clauses and meet the

competition (MTC) offers. Generally, an MFC clause requires the seller to offer the buyer a price at least as low as the price offered by the seller to other buyers of the same, or substantially similar, product. An MTC offer ensures that the buyer is entitled to the best price available in the market, not just the best price offered by a particular supplier, even if the customer is contracted to that supplier."