The problem here did not come from the target's own business. It came from the buyer's own price list.
Short answer
Yes — if the target has a customer contract guaranteeing that customer the lowest price charged to anyone for the same products, closing a deal that puts the target under the same corporate roof as a buyer whose OWN pricing for a different, larger customer is lower can trigger the clause the moment both prices sit inside one company, cutting margin on the target’s largest account from day one of ownership, regardless of anything the target itself did wrong.
No specific Canadian statute governs the enforceability of a most-favoured-nation pricing clause in an ordinary commercial supply contract between two private parties; it is enforced as written, as a matter of ordinary contract law. The risk here is entirely deal-structural: it comes from the ACQUIRER’s own price list, not from anything in the target’s own history — unusual in a diligence review that is otherwise built around finding problems in the seller’s own business rather than the buyer’s.
The fix is renegotiating the clause into a narrower, product-line-specific form before closing — accepting a defined, priced cost — rather than discovering the conflict after the two price books are combined. The earlier in diligence the acquirer’s own competing pricing is checked against the target’s MFN commitments, the cheaper that renegotiation is; checked only after closing, the clause has already triggered and the customer already knows it. On one file in this hub the renegotiated, narrower clause still cost the buyer roughly $140,000 a year in margin on that single account — priced into the deal before closing rather than discovered as a surprise after it, which is the entire difference this diligence step buys.
See it decided in the MFN clause case file and the volume-rebate continuity file.
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