Most Favoured Customer (MFC)
A contract clause requiring the supplier to offer the buyer pricing at least as good as the supplier's best customer pricing.
Definition
Most Favoured Customer (MFC) is a contract clause requiring the supplier to offer the buyer pricing at least as good as the supplier's best customer pricing for comparable goods or services. MFC clauses are sometimes included in public sector framework agreements to give buyers reassurance that they are not paying above-market rates. The clause is contested in commercial practice: buyers value the protection; suppliers point out that MFC can have unintended effects on broader market pricing and may not deliver the value intended.
How it works in practice
MFC clauses come in several shapes: tightly defined (comparing pricing on identical goods to identically-situated customers), broadly defined (pricing on comparable goods to comparable customers), and time-limited (MFC for a defined period, reset periodically). The tighter the definition, the easier to enforce but the lower the practical effect. The broader the definition, the wider the protection but the harder to enforce reliably. Suppliers worried about MFC clauses sometimes structure their pricing to avoid triggering the clause: differentiated product variants for different customer segments, customer-specific terms (volume commitments, term commitments) that justify pricing differences, and explicit MFC carve-outs in customer-specific agreements. Many sectors have moved away from MFC because of the unintended market effects: MFC clauses can reduce competitive pressure (suppliers cannot discount to win business without triggering MFC obligations to other customers) and can prop up pricing across the wider market. Public sector framework agreements increasingly use alternative mechanisms (published rate cards with periodic benchmarking, volume-based pricing tiers, contract management clauses requiring justification of price increases) rather than blanket MFC clauses. Bidders should read MFC clauses carefully and assess the practical impact on their commercial strategy.
Common questions
Are MFC clauses common in public sector procurement?
Less common than in the past. Public sector buyers increasingly use alternative mechanisms (published rate cards, periodic benchmarking, contract management on price increases) because MFC clauses have unintended market effects and can be difficult to enforce. Some frameworks still include MFC; check specific framework documentation.
How is MFC enforced?
Through audit clauses in the contract: the buyer (or its auditor) has rights to inspect supplier pricing across comparable contracts and to claim refunds for MFC breaches. Practical enforcement requires both the audit right and the appetite to exercise it; many MFC clauses go unaudited for the contract term.
Can I refuse to accept an MFC clause?
You can raise the clause as a clarification or attempt to negotiate it out of the contract. In open procurement procedures the contract terms are usually fixed before tender and bidders accept them as part of the response; rejection of contract terms can disqualify the bid. In Competitive Flexible procedures there may be more room to negotiate. Assess the practical impact before deciding.