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ASA requests review of ‘Most Favored Nations’ clause

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Nov. 1, 2012—At the request of its membership, the Automotive Service Association has requested the U.S. Department of Justice review the Most Favored Nation (MFN) clauses used in many direct repair agreements used by repairers.

ASA recently sent a letter to the Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice regarding the issue after many members of the ASA Collision Division Operations Committee expressed conxcern that many direct repair agreements offered by insurance companies contain MFN or “Most Favored Customer” clauses.

The Department of Justice and the Federal Trade Commission (FTC) have previously made the following comments regarding MFNs:

“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.”

MFN clauses appear in a number of agreements offered by major national insurance companies and some insurance companies that are only well known in particular states.

In its letter requesting the review, ASA noted the potential harmful, anti-competitive impact of these clauses on consumers and collision shops.

The Department of Justice has already expressed interest in MFN clauses in recent litigation and on Capitol Hill.

ASA participated in a workshop on MFN clauses earlier this year hosted by the Justice Department and the FTC. ASA maintains that the anti-competitive nature of the clauses puts both consumers and collision shops at a disadvantage.

To view ASA’s letter to Department of Justice and related documents, please visit ASA’s legislative website at www.TakingTheHill.com.

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