Most Favored Nation clauses are topic for CIC Portland

March 19, 2014
The CIC Portland meeting will address Most Favored Nation clauses, their misuse and why they are increasingly being used in collision repair.

I always find it interesting when I am in the presence of someone who has been involved in the collision repair industry for decades and someone involved for, let’s say, a lot less.  Especially when the discussion turns to industry efforts through legal, legislative, or regulatory means to address controversial industry practices. 

Invariably, the old timer will say, “we tried that 30/20/10 years ago, and we are still talking about it.”  Well, we may be about to set a new world record with the topic of Most Favored Nation (MFN) clauses.  With origins dating back to the Silk Road trade routes of the 11th century MFN’s certainly predate any of the ongoing dialogue regarding collision repair issues.

On April 9 and 10, 2014 the Collision Industry Conference (CIC) will meet in Portland Oregon.  The Governmental Committee will present on the issue of Most Favored Nation clauses within contracts.  While much of the debate and recent regulatory activity has been focused on the use, and misuse, of MFN’s within the healthcare field, MFN’s are increasingly being used in many areas of commerce, including collision repair.

The Committee presentation will include an overview of the “History of MFN’s” and how they have transformed from an international tool used by nations to ensure fair trade to one that is increasingly used by businesses.  Both the perspective of using MFN’s to ensure fair treatment and to gain an unfair competitive advantage by a business will be discussed.

The presentation will also outline an important distinction about when (generally) the government considers MFN clauses to be legally incorporated into an agreement and when such use is considered antitrust or anti-competitive behavior.  A key distinction is the market power associated with the company requesting MFN treatment. 

While the federal government under the Obama administration has been very active in the area of antitrust, including the establishment of a Department of Justice/Federal Trade Commission joint task force on MFN usage and effect, much of the attention has been on insurers operating in the health care industry.  However, with an increase of MFN clause usage in property and casualty, many states, and the federal government, have begun to look at the issue as well.  The presentation will cover these efforts and look at recently enacted laws as well as pending legislation.

Another very important aspect of the presentation will be about the potential for proliferation of these clauses in agreements within the collision repair industry.  Please note that this will NOT be limited to insurer/repairer agreements.  Isn’t it conceivable that an insurer could exercise this option with, lets say, a rental car provider?  Might a large MSO collision repairer make such a request of a parts supplier with respect to parts price discounts?  Are their other linear relationships that might be at risk; or reward?

Those participating in the presentation represent a cross section of those with a vested interest in the topic.  These include members of the collision repair community, repairer and insurer associations, government, academia, and other business sectors outside the collision industry that have been addressing the issue of MFN clauses within business agreements.

Considering this topic has been debated for about 1000 years there are no illusions that everyone will walk away with a final definitive answer on the issue.  But CIC, as many know, is not designed to present a conclusion as much as inform the industry of the facts on a certain topic, and provide multiples perspectives and positions, allowing the body to utilize the information as it sees fit.   

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