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When Apple launched the iPad in 2010, its then CEO Steve Jobs was quizzed on camera about the price of e-Books to be sold through the device's iBooks application. Why would someone buy a book from Apple for $14.99 if the same book was offered for $9.99 by Amazon? Steve Jobs's response: "Well, that won't be the case .... The prices will be the same."1
How could he be so sure? It emerged that this was specified in a contractual condition between Apple and the book publishers, a form of Most Favored Nation (MFN) clause requiring that the publishers price their e-Books no higher on Apple's iBook platform than they were priced on other online platforms. These clauses form a key component of the U.S. Department of Justice's action against Apple and several publishers, which has recently been successful on appeal to the Second Circuit.2 In commitments signed with the European Commission in order to terminate its own e-Books case, Apple has also agreed to remove these terms from its contracts in the European Union.3
Such "Retail Price MFN clauses" can be distinguished from the more standard wholesale price MFN clauses and seem to be a relatively new phenomenon, at least within the experience of antitrust authorities. Since these clauses arise primarily in the context of online retail platforms, they are also sometimes known as "platform MFNs" or "platform parities." The essence of the restriction involved is clear from the Apple e-Books case. In a context where it is the supplier, rather than the retailer, that sets final retail prices,4 a Retail Price MFN clause requires the supplier not to set retail prices any higher than the corresponding prices for that supplier's goods when offered through, or by, any other retailer.5
Major Internet retailer Amazon dropped a similar "price parity" condition across Europe in the face of antitrust concerns.6 The clause in question lay within Amazon's standard contract for traders selling through the company's online retail platform, Amazon Marketplace. It prohibited a trader from selling a product for a lower price, including the delivery charge, on its own website or on another retail platform such as eBay or play.com. Amazon stated this rule was "critical to preserve fairness for Amazon customers" who expect to...