Commerce Act Competition Law In New Zealand: Key Rules For Businesses

If you’re building a business in New Zealand, you’ll probably collaborate with suppliers, set pricing, negotiate distribution deals, and keep an eye on competitors. All of that is normal.

But there’s a line between competitive business strategy and conduct that can breach New Zealand’s competition laws (mainly under the Commerce Act 1986).

The tricky part is that competition law isn’t just for big corporates. Startups, eCommerce stores, service businesses, franchises, trades businesses, and fast-growing platforms can all stumble into competition issues - often without realising it.

Below, we break down what New Zealand competition law covers, what the Commerce Act is trying to prevent, the kinds of business arrangements that can create risk, and practical ways to keep your business protected from day one.

Note: This article is general information only and not legal advice. Competition law is highly fact-specific, so it’s worth getting advice on your specific arrangement.

What Is New Zealand Competition Law (And Why Should Small Businesses Care)?

New Zealand competition law is designed to keep markets competitive so customers get fair prices, innovation is encouraged, and businesses compete on merit (not behind-the-scenes agreements).

The main law is the Commerce Act 1986, which is enforced by the Commerce Commission. Broadly, the Act targets conduct that:

• stops competitors competing properly;
• creates unfair barriers for new entrants (including startups);
• lets a business with substantial market power act in ways that harm competition; and
• reduces competition through certain mergers and acquisitions.

For small businesses and startups, this matters because competition risks often pop up during:

• partnership discussions and joint ventures;
• distribution arrangements (online or offline);
• industry groups and “informal” competitor chats;
• rapid growth where you start to gain market influence; and
• buying or selling a business (or acquiring a competitor).

Getting it wrong can lead to serious penalties, reputational damage, and costly investigations - so it’s worth understanding the basics early.

What Business Behaviour Is Prohibited Under The Commerce Act?

The Commerce Act has a few “headline” risk areas that come up most often in day-to-day business.

Cartel Conduct (Price Fixing, Market Allocation, Bid Rigging)

One of the biggest focuses in New Zealand competition law is cartel conduct. This is where competitors agree (formally or informally) to avoid competing.

Cartel conduct can include:

• Price fixing: agreeing with a competitor on the price you’ll charge (or a minimum price, surcharge, discount level, “industry rate”, etc.).
• Market allocation: agreeing to split customers, territories, regions, or types of work (e.g. “you take North Shore, we’ll take West Auckland”).
• Bid rigging: coordinating who will win a tender, quote, or procurement process (including cover pricing).

This can happen in surprisingly casual ways - like a conversation at an industry event, a group chat between business owners, or “let’s keep prices stable” discussions.

Important: There are limited exceptions and “carve-outs” in the Act (for example, certain collaborative activities / joint ventures where the cartel provision is reasonably necessary for the collaboration). These exceptions are technical and fact-specific - so if you’re working closely with a competitor, it’s worth checking the structure before you proceed.

Tip: If your competitor suggests coordinating pricing or “staying in your lane”, treat that as a red flag and get advice quickly.

Vertical Arrangements (Supplier/Reseller Restrictions)

Not all competition issues involve competitors. Some risk comes from “vertical” arrangements - like supplier-to-retailer, wholesaler-to-reseller, or platform-to-merchant relationships.

Examples include:

• exclusive supply or exclusive distribution terms;
• restrictions on where a reseller can sell (territories, channels, customer types);
• restrictions on online sales; and
• terms that limit who your supplier can supply to (or who you can buy from).

These terms are not automatically illegal in New Zealand. The key question is usually whether the arrangement has the purpose, effect, or likely effect of substantially lessening competition in a relevant market (which depends heavily on context - including market shares, the availability of alternatives, the duration of the restriction, and the commercial rationale).

If you’re building a reseller network or appointing distributors, a properly drafted Distribution Agreement can help set clear boundaries without accidentally baking in high-risk restrictions.

Resale Price Maintenance (Setting A Minimum Resale Price)

A common trap is trying to control the price your resellers charge end customers.

In simple terms, resale price maintenance is where a supplier requires (or pressures) a reseller to sell at a particular price - especially a minimum price. Resale price maintenance is generally prohibited, and enforcement risk can arise even where pressure is indirect.

Some businesses try to manage brand positioning by:

• telling retailers the “minimum advertised price”;
• threatening to cut supply if they discount; or
• creating incentives that effectively punish discounting.

There are nuanced differences between recommended retail pricing (which can be lawful if genuinely optional) and unlawful pressure or conditions. If you rely on resellers, it’s worth getting advice on how to structure pricing communications safely.

Anti-Competitive Agreements (The “Substantial Lessening Of Competition” Test)

Some arrangements aren’t automatically banned, but may still breach the Commerce Act if they have the purpose, effect, or likely effect of substantially lessening competition.

This can include agreements involving:

• exclusive dealing;
• long-term “lock in” arrangements;
• bundling products/services in a way that blocks competitors; or
• restricting customer choice without a strong commercial justification.

If your model relies on exclusivity (e.g. exclusive supplier relationships or exclusive territories), it helps to understand the risk profile and document the commercial rationale. This is a common area where early legal input saves a lot of pain later.

For a plain-English explanation of the concept, exclusive dealing is a good starting point when you’re assessing whether an “exclusive” clause is actually necessary (and how far it should go).

What Does “Misuse Of Market Power” Mean For Growing Businesses?

Competition law isn’t only about agreements - it also looks at unilateral conduct by a business with substantial market power.

Under the Commerce Act, a business with a substantial degree of market power must not engage in conduct that has the purpose, effect, or likely effect of substantially lessening competition in a market. In other words, “misuse of market power” is not about being big on its own - it’s about conduct that harms the competitive process (assessed in context).

This matters for startups more than you might expect. You don’t need to be a household name to raise market power questions. In niche markets (say a specialised B2B software tool, a local essential service, or a platform with strong network effects), a fast-growing business can quickly become a “must-have” provider.

Examples of conduct that may raise risk (depending on context) include:

• predatory pricing (pricing below cost in a way that is likely to damage competition, including by deterring or eliminating rivals, and then allowing prices to rise later);
• refusing to supply (or limiting access) in a way that harms the competitive process without a strong legitimate justification;
• tying or bundling in ways that make it hard for customers to choose alternatives; and
• contract terms that lock customers in without a genuine commercial need (especially where customers lack realistic alternatives).

If you’re pricing aggressively to win market share, it’s worth understanding the difference between healthy competition and high-risk strategies. This is where concepts like predatory pricing become relevant - especially if you have investors pushing for fast growth.

Competition Law Risks In Day-To-Day Business Deals (Where People Accidentally Slip Up)

Most Commerce Act problems don’t start with “we’re going to break the law.” They start with a deal that feels commercially reasonable - until you zoom out and look at how it affects the market.

Here are common scenarios where small businesses and startups should be careful.

1. Talking Too Freely With Competitors

It’s normal to know other business owners in your industry. But competitor discussions should never drift into:

• pricing plans, margins, or future price changes;
• who is targeting which customers;
• who will “go after” which tender;
• agreeing not to poach staff or contractors (which can raise serious competition concerns); or
• sharing sensitive commercial strategy.

Even if nothing is signed, informal understandings can still create legal risk.

2. Joint Ventures, Collaborations, And “Friendly” Partnerships

Collaborating can be a great way to scale - especially if you’re sharing costs, technology, or routes to market. But if the collaborators are competitors (or potential competitors), you need to structure things carefully.

Common problem areas include:

• agreements that go beyond the project and restrict competition more broadly;
• information sharing that isn’t necessary for the collaboration;
• “non-compete” style restrictions that are too wide; and
• collaboration terms that effectively carve up the market.

This is where having clear, well-scoped contracts matters. As a baseline, you want your agreement to be enforceable and clear on each party’s obligations and boundaries - starting with what makes a contract legally binding in New Zealand.

Also, if you’re sharing commercially sensitive information (like pricing models, customer lists, product roadmaps, or supplier terms), put confidentiality protections in place early. A properly drafted Confidentiality Clause (or NDA) helps reduce the risk of information being misused later.

3. Supplier And Customer Contracts That “Lock In” The Market

Long-term contracts aren’t automatically a problem. But the more your agreements:

• restrict customers from choosing alternatives;
• restrict suppliers from supplying others; or
• punish customers for switching,

the more you should think about competition risk (especially if you’re becoming a major player in a small market).

Solid Business Terms & Conditions can help you manage risk in a practical way - like clarifying payment terms, service levels, limitation of liability, and termination rights - without relying on overly restrictive clauses that could backfire.

Do Mergers, Acquisitions, Or Buying A Competitor Raise Commerce Act Issues?

They can, yes.

If you’re considering acquiring another business (or merging operations), the Commerce Act looks at whether the deal would be likely to substantially lessen competition in a market. This can apply even to relatively small deals, depending on how concentrated the market is.

For example:

• Two local service providers in a small region become one.
• A fast-growing startup buys a direct competitor for their customer base.
• A platform business buys a key supplier or distributor.

None of these are automatically unlawful - but they can raise flags if the result is fewer meaningful choices for customers, higher prices, or reduced innovation.

If you’re doing any kind of acquisition, you should treat competition law as part of your legal due diligence, alongside employment, IP, privacy, and contract reviews. It’s also helpful to understand the typical steps and documents involved in Mergers & Acquisitions so you can plan timelines and costs properly.

In some cases, businesses apply for clearance or authorisation (for example, where a transaction or conduct might otherwise raise competition issues). Whether that’s needed is very situation-specific - so it’s worth getting tailored advice early, before you sign anything binding.

How Can You Build A Practical Competition Law Compliance Plan?

You don’t need a 50-page manual to take competition seriously. For most small businesses, a simple, practical compliance approach is enough - especially if you build it into how you negotiate deals and train your team.

Set Clear “Competitor Conversation” Rules

Make it a rule (for you and your staff) that competitor conversations should avoid:

• prices, margins, and future pricing intentions;
• tender strategies;
• customer allocation; and
• commercially sensitive information.

If you’re in an industry association or networking group, it’s okay to participate - but keep meetings structured and don’t “workshop” pricing.

Pressure-Test Any Exclusivity Or Pricing Controls

If a deal relies on exclusivity, minimum pricing, or restrictions on where/how someone sells, ask:

• Is this restriction genuinely necessary to make the deal work?
• Could we narrow it (shorter term, smaller territory, fewer restricted channels)?
• Does this block customers or suppliers from realistic alternatives?

If you can’t clearly explain why a restriction is needed, that’s often a sign it should be reworked.

Get Your Contracts Drafted To Fit The Deal (Not A Template)

Competition risk often comes from “copy and paste” clauses that don’t match what you’re actually doing. A template can accidentally include:

• overly broad non-competes;
• restrictions that look like market allocation;
• pricing terms that create resale price maintenance risk; or
• exclusivity that goes further than intended.

Well-drafted agreements help you stay commercially flexible while staying legally safe.

Document The Pro-Competitive Rationale

In many situations, the difference between “risky” and “reasonable” is context. If you have a legitimate business reason for a term (like exclusivity to justify investment in marketing, training, or infrastructure), document it.

That way, if your arrangement is ever questioned, you can show it was designed to support a workable commercial model - not to block competition.

Key Takeaways

• New Zealand competition law is mainly governed by the Commerce Act 1986 and applies to businesses of all sizes, including startups and small businesses.
• High-risk conduct includes cartel behaviour like price fixing, market allocation, and bid rigging - even if it’s informal or “just a chat” - although there are limited exceptions (such as certain collaborative activities) that should be assessed carefully.
• Supplier and reseller arrangements can create issues too, especially around exclusivity, territory restrictions, and resale price controls - and they’re often assessed by whether they substantially lessen competition in context.
• As your business grows, “misuse of market power” risks can become relevant in niche or concentrated markets, and the key test is whether conduct by a firm with substantial market power has the purpose, effect, or likely effect of substantially lessening competition.
• Mergers and acquisitions can trigger Commerce Act concerns if they’re likely to substantially lessen competition, so competition law should be part of your due diligence.
• The safest approach is practical: set internal rules for competitor contact, pressure-test exclusivity and pricing controls, and use properly drafted contracts that match the commercial deal.

If you’d like help reviewing an agreement, setting up a reseller or distribution model, or checking whether a proposed deal raises Commerce Act risks, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.