Most Favored Nation Clause

A vendor is buying four million miles of pipe to slip into the ocean, boil off the salt, and produce fresh water for the masses. The process is called desalinization. This is the first buyer of pipe at scale for this process. They're taking enormous risk in being that first penguin in the water. What if there are sharks (i.e. it turns out that the inland states didn't really need or want fresh water all that badly)? Well, they worry that the 2nd, 3rd, and 4th competitors will come in, and off of their initial orders (which let the vendor scale to produce huge volumes at cheap prices), those other competitors will gain access to yet-cheaper pipe as the industry scales to become enormous. And yes, we have tons of sea water, and not all that much fresh water, so the notion is hopefully not crazy.

Anyway, to protect themselves against being under-cut in pricing inside of an industry Company A created, they require Most Favored Nations pricing. That is, they're paying $3.28 a foot for pipe today. If, at scale, that same volume pricing drops to $2.87, then Company A wants to be able to pay only $2.87 and not be stuck at $3.28.

Think of the competitors as "nations," and nobody in this deal with the pipe makers will be getting a better cost per foot than Company A. They are at least the most favored in the group with regard to pricing.