Commerce Act 1986: What It Means For Competition And Pricing In NZ

If you run a small business in New Zealand, you’re probably focused on the practical stuff: getting customers, setting prices, finding suppliers, and (hopefully) growing.

But as soon as you’re in a market with competitors - or you’re supplying, distributing, reselling, partnering, or acquiring another business - New Zealand’s competition law can come into play, including the Commerce Act 1986.

The good news is you don’t need to be a big corporate to take this seriously. The Commerce Act applies across the board, and small businesses can get caught out simply by “doing what everyone does” in an industry.

Below, we’ll break down what the Commerce Act is trying to do, the business behaviours that create risk (especially around competition and pricing), and some practical steps you can take to stay on the right side of the law as you grow.

What Is The Commerce Act 1986 (And Why Does It Matter)?

The Commerce Act 1986 is New Zealand’s core competition law. In plain English, it’s designed to keep markets competitive and prevent businesses from using market power or anti-competitive arrangements in a way that harms competition (and ultimately consumers).

For a small business owner, “competition law” can sound abstract. But it becomes very real when you’re:

• setting or discussing prices (even casually) with competitors
• joining an industry association or group chat where competitors talk shop
• setting conditions for resellers, distributors, or franchisees
• negotiating exclusivity with a supplier or key customer
• buying, selling, or merging with another business

It’s also worth keeping the boundaries clear between the Commerce Act and other laws that often get mixed into the same conversation:

• Commerce Act 1986: focuses on competition (how businesses behave in a market, including pricing coordination and substantial lessening of competition issues).
• Fair Trading Act 1986: focuses on misleading or deceptive conduct in trade (how you market and sell). Issues like advertised price problems can sit here, even though people often assume it’s “competition law”.
• Consumer Guarantees Act 1993: consumer rights for goods/services (quality, fitness for purpose, remedies). If you’re setting policies around customers and faults, you’ll want these aligned with warranties in NZ law.

In other words: the Commerce Act is about how you compete. The Fair Trading Act is about how you communicate and sell.

How The Commerce Act 1986 Regulates Competition (The Big “Don’ts”)

The Commerce Act is particularly concerned with conduct that stops customers from benefiting from genuine competition - like better prices, better quality, and innovation.

From a practical standpoint, there are a few “high-risk” behaviours every small business should understand.

Price Fixing And Cartel Conduct

This is one of the biggest danger zones.

If you and your competitors agree (or even just coordinate) on prices, discounts, surcharges, fees, or key pricing terms, that can raise serious issues. It doesn’t need to be a formal written agreement. Even “gentleman’s agreements”, group messages, or “let’s all put prices up next month” conversations can be a problem.

Cartel conduct can also include agreements between competitors about:

• who will supply which customers or territories (market allocation)
• who will win a tender (bid rigging)
• limiting output or capacity (e.g. “let’s cap how much we produce so prices stay high”)

If you’re in a tight-knit industry, it can feel normal to compare notes. But competition law draws a hard line when those chats cross into coordination.

Anti-Competitive Agreements Beyond Cartels

Not every risky agreement is a “cartel” in the obvious sense. Certain arrangements can still substantially lessen competition even if they don’t look like classic price fixing.

Examples can include some exclusivity arrangements, restrictions imposed on resellers, or agreements that lock competitors out of supply channels.

If you’re putting restrictions into contracts (with resellers, distributors, service providers, or suppliers), it’s worth getting those terms reviewed alongside your broader commercial approach and terms of trade, so you’re not accidentally baking competition risk into your documents.

Market Power And Section 36 (Why Even Smaller Businesses Should Pay Attention)

“Misuse of market power” is often talked about as something only a major player can do, but it’s important to understand how the Commerce Act approaches this now.

Under section 36, a business that has a substantial degree of power in a market must not engage in conduct that has the purpose, effect, or likely effect of substantially lessening competition in that market.

Many small businesses won’t have that level of market power. But you might still interact with businesses that do (like dominant suppliers, platforms, or major buyers), and your contracts and pricing can be affected.

Also, you may become “big” faster than you think - especially in a niche region or specialised service area. If you start becoming the default provider, it’s smart to pressure-test your policies early rather than later.

Competition And Pricing: What You Can (And Can’t) Do In The Real World

Pricing is one of the most common ways businesses accidentally stumble into Commerce Act issues - usually because pricing decisions are made quickly, informally, and based on what others are doing.

Here are the practical pricing areas to watch.

Can You Copy A Competitor’s Price?

In many situations, yes - independent pricing (including choosing to match a competitor) is generally allowed.

The risk is how you get there. If you’re matching prices because you independently observed public pricing (like a website or catalogue), that’s different from discussing pricing directly with a competitor and agreeing to align.

A simple rule of thumb: you can react to the market, but don’t coordinate the market.

Minimum Resale Prices And Controlling What Others Charge

If you supply goods to resellers (for example, you’re a brand owner, wholesaler, or distributor), you might be tempted to set minimum prices to “protect the brand” or stop discounting.

Minimum resale pricing is a classic competition-law risk area, and it’s something to handle carefully. If you’re thinking about controlling downstream pricing, it’s worth getting advice early - especially if you’re also working through distribution arrangements, incentives, or supply conditions. (You can also sanity-check the concept at a high level via minimum resale prices.)

Predatory Pricing (Pricing Too Low On Purpose)

Most small businesses worry about pricing too high - but pricing too low can also create legal issues in some circumstances, especially when it’s done strategically to push competitors out and then raise prices later.

This concept is often referred to as predatory pricing. If you’re aggressively undercutting in a way that isn’t commercially sustainable (and the purpose is to remove competition), you may want to pause and get advice. A useful background explainer is predatory pricing.

Discounting, Promotions, And “Fair Trading” Overlap

A lot of pricing risk is actually not the Commerce Act - it’s the Fair Trading Act 1986 (misleading conduct).

For example, issues like “was/now” pricing, drip pricing, hidden fees, and unclear surcharges can create compliance headaches even if there’s no competition issue.

If your marketing team (or you, at 10pm on a Sunday) is putting up price claims, make sure they’re accurate and properly disclosed - particularly around advertised price requirements.

Working With Competitors, Suppliers, And Distributors Without Crossing The Line

Many Commerce Act issues don’t come from “bad actors”. They come from businesses trying to create stable relationships - like reliable supply, consistent service quality, or simplified distribution.

Here are some common arrangements where small businesses should be careful.

Industry Groups, Networking, And “Helpful” Information Sharing

Industry communities can be great for learning - but they’re also one of the most common ways competitors end up in risky conversations.

Be cautious about discussing:

• specific prices, margins, or pricing formulas
• upcoming price increases
• which customers are “yours” vs “theirs”
• boycotting a supplier or customer
• tender strategies or who “should” win a job

If you’re attending industry meetings, it’s worth having a simple internal rule: keep conversations high-level, and leave (politely) if the discussion drifts into pricing coordination or customer allocation.

Exclusive Supply Or Exclusive Dealing

Exclusivity can be commercially sensible. For example, a supplier might offer better pricing if you buy exclusively from them, or you might want a distributor to exclusively represent your product in a region.

But exclusivity can raise Commerce Act issues if it has the effect of substantially lessening competition in a market (for example, locking up key supply channels so competitors can’t compete effectively).

The risk depends on context: market size, duration, whether alternatives exist, and how much market share is being “tied up” by the exclusivity.

Before you sign an exclusivity arrangement, it’s smart to make sure your core commercial terms are clearly documented - including termination rights and scope. This often ties back to having clean terms and conditions that match how you actually do business.

Refusing To Deal And “Blacklisting”

Sometimes businesses decide they don’t want to supply a particular customer, reseller, or contractor - maybe due to non-payment, reputational risk, or repeated disputes.

In many cases, choosing who you deal with is a legitimate commercial decision. The Commerce Act risk tends to increase when there is coordination (e.g. competitors agreeing not to supply someone), or when a business with substantial market power refuses to deal in a way that substantially lessens competition.

If your team is talking about “everyone should stop supplying them,” that’s a red flag.

Mergers, Acquisitions, And Buying A Competitor

Growth often includes buying a competitor or acquiring a complementary business. Even if you’re a small player, acquisitions can raise competition issues if the deal reduces competition in a specific local area or niche market.

If you’re in due diligence or negotiations, it’s wise to think about competition risk early - not after you’ve spent months (and money) getting close to completion.

And while it’s not strictly Commerce Act-focused, you’ll usually want the transaction documented properly with an Asset Sale Agreement or share sale documentation that matches the structure of the deal and allocates risk in a sensible way.

Practical Compliance Steps For Small Businesses (A Simple Checklist)

The Commerce Act isn’t something you “set and forget”. It’s more like an operating rule for how you compete - and it should show up in your culture, your contracts, and your decision-making.

Here are practical steps that can make compliance much easier.

1) Keep Pricing Decisions Independent (And Document Your Reasoning)

If you’re ever challenged about pricing conduct, it helps to be able to show you arrived at prices independently.

Good internal practice includes:

• recording your pricing inputs (costs, market positioning, demand, supply constraints)
• limiting competitor-price discussions (use publicly available sources if benchmarking)
• having a clear internal approval process for price changes

2) Train Your Team On “Competitor Conversations”

You don’t need a 30-page compliance manual to make a difference. Even a short training session (and a written “do/don’t” list) for anyone in sales, procurement, or leadership can prevent accidental problems.

Pay special attention to people who attend industry events or manage partnerships, because that’s where casual conversations can drift.

3) Review Your Contracts For Competition Risk Triggers

Many small businesses build commercial relationships quickly - especially when you’re scaling. But clauses around exclusivity, territory restrictions, and reseller controls can create legal risk if they’re not thought through.

It’s also helpful to have your standard commercial foundation consistent across customers and channels, including clear terms of trade and a structure for how you handle disputes, refunds, delivery, and payment.

4) Don’t Let Marketing Create Legal Problems For Your Pricing Strategy

Even if your competitive behaviour is fine, your advertising might not be. Make sure your pricing claims are accurate, clearly disclosed, and consistent across channels.

If you run promotions, check that your “discount” is genuine and your price presentation isn’t misleading. A lot of small businesses get into trouble through avoidable marketing mistakes (for example, bait advertising risk can come up when stock levels and advertising don’t match what’s being promoted).

5) Get Your Legal Foundations Right Early (So You Can Scale Confidently)

Competition risk tends to increase as you grow - more customers, more suppliers, more resellers, more pressure to “standardise” pricing and channels.

This is where having properly drafted agreements and a clear legal setup matters. If your business is growing and you’re tightening up your commercial approach, it may be time to put in place (or refresh):

• customer-facing terms and conditions
• supply or distribution agreements
• contract templates for key relationships
• a consistent approach to pricing approvals and promotions

It can feel like a lot - but setting these up properly is one of the best ways to protect your business from day one and avoid messy disputes later.

Key Takeaways

• The Commerce Act 1986 is New Zealand’s main competition law, and it can affect small businesses as well as large ones.
• High-risk areas include price fixing, market allocation, bid rigging, and other forms of cartel conduct - even informal discussions with competitors can create problems.
• You can generally set prices independently (including matching market pricing), but coordinating prices or pricing strategy with competitors is where the risk escalates.
• Exclusivity, reseller controls, and distribution arrangements can be commercially useful, but may raise issues if they substantially lessen competition in a market.
• Pricing compliance isn’t only about the Commerce Act - the Fair Trading Act 1986 and consumer law also matter for advertised prices, promotions, and customer-facing claims.
• Practical steps like team training, independent pricing processes, and well-drafted commercial contracts can reduce risk and help you scale with confidence.

This article is general information only and does not constitute legal advice. If you’d like advice on your specific situation, get in touch with a lawyer.

If you’d like help reviewing your pricing practices, distribution terms, or commercial contracts (or you just want to sense-check a plan before you roll it out), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.