PDA

View Full Version : Favored Nation Pricing


alex.parker@uscellular.com
04-23-2010, 09:18 PM
I'm doing some research on what is called "Favored Nation Pricing," which is a contract clause whereby a supplier will ensure that the pricing offered is no less favorable than the pricing offered to any third party customer that purchases the same amount of product or less.

If you are familiar with this concept can you tell how you have either experienced or seen this clause being verified. In other words, if a company were to use this clause in a contract how would you go about verifying that they are receiving "Favored Nation Pricing."

Thanks!

hcammdw
10-29-2010, 07:45 PM
I have seen many contracts with similar clauses but in over 25 years of purchasing I have never seen it actually exercised. Any supplier that is on the ball will always want language like " identical products, volumes and under like terms and conditions" and thats the out. The product may be identical and maybe the volume but the terms and conditions are unlikely to be the same. Even if they are the confidential information language usually applies to the third parties contract with your supplier and that keeps you from being able to verify the terms. It usually only lets you do that by hiring and paying for a large audit firm to verify. Not normally worth the cost. I am sure someone has actually exercised the clause but I have never seen it done only used it as leverage for the future.