Commercial Clause

Pricing Protection

Protects competitive pricing information from disclosure, includes most-favored-nation provisions, and restricts use of pricing data in negotiations.

Medium Complexity

What This Clause Does

A pricing protection clause specifically addresses the confidentiality and use of pricing information shared between parties. While general NDA definitions may cover "financial information," pricing data often warrants special treatment due to its extreme competitive sensitivity. These clauses may prohibit disclosure of specific prices, discounts, terms, and deal structures; prevent the receiving party from using pricing information in negotiations with competitors or other vendors; and sometimes include Most Favored Nation (MFN) provisions guaranteeing the receiving party will not pay more than other customers.

Why This Clause Matters

  • Competitive Positioning: Pricing strategies are core competitive assets. If your pricing becomes known to competitors, they can undercut you; if known to other customers, they can demand matching terms.
  • Negotiating Leverage: Parties often share pricing to advance deal discussions. Without protection, this information could be used to extract better terms from competitors or shared with procurement consultants.
  • Margin Protection: Knowing a vendor's pricing to other customers reveals their margin flexibility and negotiating limits, fundamentally changing the bargaining dynamic.
  • MFN Benefits: For buyers, MFN clauses ensure they automatically benefit if the seller offers better terms to other customers, protecting against being disadvantaged.
  • Antitrust Considerations: Sharing pricing information between competitors can raise antitrust concerns. Even in vertical relationships, certain pricing arrangements may need antitrust review.

Legal Context

Pricing information is generally protectable as confidential information, and courts have enforced pricing confidentiality provisions in appropriate circumstances. However, MFN clauses have received increased antitrust scrutiny in recent years, particularly in healthcare and technology sectors. The FTC and DOJ have challenged certain MFN provisions as anticompetitive when they reduce price competition or create barriers to entry. Additionally, some states have enacted laws restricting MFN clauses in specific industries (such as health insurance). When drafting pricing protection clauses, consider both confidentiality and antitrust implications, and ensure MFN provisions are narrowly tailored to legitimate business interests.

Pricing Confidentiality All pricing information, including but not limited to unit prices, discounts, volume commitments, and payment terms, disclosed by either party shall be treated as Confidential Information of the disclosing party and shall be subject to all confidentiality obligations under this Agreement. Neither party shall use the other party's pricing information in negotiations with third parties or disclose such information to any competitor of the disclosing party.
Basic Version: Confirms pricing falls within confidential information and adds specific restrictions on competitive use. Suitable for straightforward vendor relationships.
Pricing Information Protection 1. Definition of Pricing Information. "Pricing Information" means any information related to pricing, fees, rates, discounts, rebates, credits, payment terms, volume commitments, pricing methodologies, cost structures, margin information, and the commercial terms of any proposal, quote, or agreement between the parties. 2. Enhanced Confidentiality. Pricing Information shall be treated as Confidential Information subject to all protections under this Agreement. In addition, the Receiving Party agrees to: (a) Limit access to Pricing Information to those employees and advisors who have a direct need to know for purposes of evaluating or administering the business relationship; (b) Not use Pricing Information as a benchmark or reference point in negotiations with any third party, including competitors of the Disclosing Party; (c) Not share Pricing Information with any procurement consultant, purchasing cooperative, or similar advisor without the Disclosing Party's prior written consent; (d) Not disclose that specific pricing has been offered, even without disclosing the actual amounts. 3. Competitive Use Prohibition. The Receiving Party shall not: (a) Provide Pricing Information to any competitor of the Disclosing Party; (b) Use Pricing Information to solicit competitive bids or to negotiate improved terms from other vendors; (c) Aggregate or analyze Pricing Information together with pricing from the Disclosing Party's competitors. 4. Survival. The obligations in this section shall survive termination of this Agreement for a period of five (5) years, or for as long as the Pricing Information remains confidential, whichever is longer. 5. Remedies. The Receiving Party acknowledges that disclosure of Pricing Information would cause substantial competitive harm and that monetary damages would be difficult to calculate. The Disclosing Party shall be entitled to injunctive relief for any breach or threatened breach of this section.
Standard Version: Comprehensive pricing protection with defined scope, specific use restrictions, and enhanced remedies. Appropriate for significant commercial relationships.
Comprehensive Pricing Protection and Most Favored Nation 1. Pricing Information as Trade Secret. The Receiving Party acknowledges that the Disclosing Party's Pricing Information constitutes valuable trade secrets that have been developed through substantial investment and effort. The Receiving Party agrees to protect Pricing Information with the highest degree of care, no less than the care it uses to protect its own most sensitive trade secrets. 2. Absolute Restrictions on Pricing Information. The Receiving Party shall not, under any circumstances: (a) Disclose any Pricing Information to any third party, including affiliates not bound by this Agreement; (b) Use Pricing Information for any purpose other than evaluating or administering the specific transaction for which it was disclosed; (c) Retain any copies of Pricing Information after the business purpose has been fulfilled; (d) Discuss Pricing Information with any employee who does not have a specific need to know; (e) Refer to Pricing Information, directly or indirectly, in any communication with competitors, vendors, customers, or the media; (f) Use Pricing Information to develop competitive intelligence, market analysis, or pricing strategies; (g) Disclose even the existence of pricing discussions to any third party. 3. Most Favored Nation. The Disclosing Party represents and warrants that the pricing offered to the Receiving Party under any subsequent agreement shall be no less favorable than the pricing offered to any other customer of the Disclosing Party for comparable products, services, volumes, and terms. If the Disclosing Party offers more favorable pricing to any other customer, it shall: (a) Notify the Receiving Party within thirty (30) days of such offer; (b) Automatically extend such improved pricing to the Receiving Party, retroactive to the date first offered to the other customer; (c) Provide the Receiving Party with documentation sufficient to verify compliance. 4. Audit Rights. The Receiving Party shall have the right, upon reasonable notice and no more than once per year, to audit the Disclosing Party's records to verify compliance with the Most Favored Nation provision. The Disclosing Party shall cooperate fully with such audit and provide access to relevant pricing records. 5. Remedies for Breach. (a) Any breach of the pricing confidentiality provisions shall be deemed a material breach entitling the non-breaching party to terminate any related agreements immediately. (b) The Disclosing Party shall be entitled to injunctive relief without bond for any breach or threatened breach. (c) In addition to actual damages, the Receiving Party shall pay liquidated damages of $100,000 per incident of unauthorized disclosure, which the parties agree is a reasonable estimate of damages that would be difficult to calculate. 6. Perpetual Duration. The obligations regarding Pricing Information shall continue in perpetuity and shall never expire, recognizing that pricing strategies and market positioning information remain valuable indefinitely.
Warning - Highly Restrictive: This version includes MFN provisions with audit rights and significant liquidated damages. MFN clauses may raise antitrust concerns in certain industries. Perpetual duration and $100,000 per-incident damages may be challenged as unreasonable. Both parties should carefully evaluate the business and legal implications.

Unlimited MFN Without "Comparable" Qualifier

MFN clauses promising "the best price offered to any customer" without regard to volume, terms, or circumstances could require you to offer loss-leader promotional pricing to all customers. Ensure MFN is limited to comparable situations.

Unrestricted Audit Rights

Audit rights allowing one party to review all pricing records creates confidentiality issues with other customers and significant operational burden. Limit audits to third-party verification with aggregated results.

Retroactive MFN Adjustments

Provisions requiring retroactive price adjustments if better pricing is offered to another customer can create significant financial exposure. Negotiate for prospective-only adjustments or time-limited look-back periods.

Perpetual Pricing Confidentiality

While pricing deserves strong protection, perpetual confidentiality obligations may be impractical as market conditions, product offerings, and business relationships evolve. Consider reasonable time limits.

Excessive Liquidated Damages

Per-incident damages of $100,000 or more for pricing disclosure may be challenged as an unenforceable penalty. Such provisions also create significant risk exposure for inadvertent disclosures by employees.

Related Clauses

Definition of Confidential Information

What qualifies as protected confidential information.

Permitted Use

Allowed purposes for using confidential information.

Non-Solicitation

Restrictions on soliciting customers or employees.

Injunctive Relief

Emergency remedies for confidentiality breaches.