Commerce Act Checklist For Small Business Deals

Negotiating a supplier, reseller or collaboration deal can feel exciting, especially when it opens up a new channel or helps you grow faster. But if the deal affects prices, territories, customers or who can sell what, the Commerce Act 1986 needs to be on your radar.

The good news is that you don't need to become a competition law expert to spot the main risks. You just need to know which deal terms deserve a closer look before anyone signs, emails an agreement, or starts acting on a handshake.

Here is a practical checklist you can use when your business is dealing with suppliers, resellers, distributors, competitors or competitor-adjacent partners in New Zealand.

What Does The Commerce Act Actually Stop You From Doing?

The Commerce Act stops businesses from making arrangements that harm competition, especially cartel conduct and anti-competitive agreements. It also stops businesses with substantial market power from engaging in conduct that substantially lessens competition.

For most small businesses, the highest-risk areas aren't complicated merger rules or big corporate behaviour. They're everyday commercial conversations that stray into the wrong topics, like:

• agreeing prices with a competitor
• dividing up customers, jobs, suburbs or regions
• agreeing not to supply certain customers
• restricting a reseller's ability to set its own resale price
• using exclusivity in a way that locks out other competitors
• sharing commercially sensitive information with competitors

The Commerce Commission is the New Zealand regulator that investigates Commerce Act issues. Serious breaches can lead to large penalties. For companies, pecuniary penalties can be up to the greater of $10 million, three times the commercial gain, or 10% of turnover if the gain can't be worked out. Individuals can also face penalties, and serious cartel conduct can be a criminal offence.

This is why competition law isn't just a big business issue. A casual email, group chat or reseller term can create risk if it looks like businesses are coordinating rather than competing.

A helpful way to think about it's this: if your deal changes how you or another business competes on price, customers, territory or supply, pause and check the Commerce Act position before you move ahead.

Can You Agree Prices With Another Business?

No, you generally can't agree prices with a competitor, because price fixing is a core cartel risk under the Commerce Act.

Price fixing can be broader than simply saying, we'll both charge $100. It can include agreeing or coordinating things like:

• minimum prices
• discount levels
• fees, margins or commissions
• surcharges or delivery fees
• when prices will increase
• how much to quote for a tender or job

Say Mike runs a commercial cleaning business in Wellington. He and another cleaner often quote for the same office contracts. Over coffee, they agree that neither of them will quote below $45 per hour because everyone needs to make a living. Even if they never write it down, that kind of understanding can still create serious Commerce Act risk.

You also need to be careful with competitor-adjacent arrangements. For example, a joint promotion or joint venture with another business might be fine if you're offering complementary services. But if you're genuine competitors and the promotion involves agreeing how you'll price your competing services, that needs tailored advice.

Safe Pricing Habits

• Set your own prices independently.
• Don't discuss future pricing, margins or discounts with competitors.
• Keep pricing decisions internal unless there's a clear legal reason to share them.
• If a competitor raises pricing in a conversation, stop the discussion and make a file note of what happened.
• Be careful in industry groups, trade associations and informal founder chats.

There are some legitimate arrangements where pricing is discussed, such as agency models, franchise systems or genuine joint venture arrangements. The details matter, so don't assume a pricing restriction is safe just because it appears in a commercial contract.

Can You Give A Supplier Or Reseller Exclusive Rights?

Yes, exclusivity can be legal, but it depends on how it affects competition in the market.

Exclusive dealing usually means one business agrees to deal only with another business, or agrees to limit who it buys from, sells to or supplies. Common examples include:

• a distributor gets exclusive rights to sell your product in Auckland
• a supplier requires you to buy all stock from them
• a reseller can only sell through one online marketplace
• a manufacturer agrees not to supply competing retailers in a defined area

Many exclusive arrangements are commercially sensible. They can encourage a distributor to invest in marketing, give you a stable supply chain, or help you launch into a new region.

The risk increases when the exclusivity makes it harder for other businesses to compete. For example, if a supplier controls a must-have product and locks up all retailers in a region, that could raise concerns. The same goes for long exclusivity periods, automatic renewals, broad non-compete wording or rules that stop customers from accessing alternatives.

Exclusivity Checklist

Before you agree to exclusivity, ask:

• What exact products or services are covered?
• What area or customer group is covered?
• How long does the exclusivity last?
• Can either side end it if sales targets aren't met?
• Does it stop customers from getting a fair choice?
• Does either party have strong market power?
• Are there less restrictive ways to achieve the same commercial outcome?

If you use exclusivity, keep it no broader than needed. A 12-month exclusive distribution right with clear sales targets is usually easier to justify than an indefinite, nationwide restriction with no performance obligations.

Can You Tell Resellers What Price To Charge?

Usually no, you can't force resellers to sell at a fixed or minimum resale price, because that can amount to resale price maintenance.

This comes up often when your brand wants consistent pricing across stores, websites or marketplaces. You might worry that discounting will damage your brand or annoy other resellers. Those concerns are understandable, but the law draws a strong line around resale pricing.

High-risk terms include telling a reseller that they:

• must not sell below a set price
• must get approval before discounting
• will lose supply if they advertise a lower price
• must follow your minimum advertised price policy
• can only run promotions you approve

You can usually recommend a resale price, as long as it's genuinely a recommendation. That means the reseller must be free to charge less or more. Wording like recommended retail price helps, but the way you behave matters too. If you pressure resellers, threaten supply cuts or punish discounting, the label won't save the arrangement.

Worked Example

Imagine Hana sells skincare products to 20 boutiques around New Zealand. She recommends that a face serum retail at $60. One boutique advertises it for $49. Hana emails them saying, bring it back to $60 by Friday or we won't supply your next order.

That email is the problem. Even if Hana's original $60 price was only recommended, threatening supply because of discounting can turn the arrangement into a Commerce Act risk.

A safer approach is to manage brand value through product quality, packaging standards, approved marketing materials and clear brand guidelines, rather than minimum resale pricing.

Can You Split Customers, Territories Or Jobs With A Competitor?

No, you generally can't agree with a competitor to divide customers, territories, suppliers or contracts, because market sharing is a serious cartel risk.

Market sharing can happen in surprisingly ordinary situations. You might be at capacity and think it makes sense to agree with a competitor that you'll take the North Shore and they'll take South Auckland. Or two consultants might agree not to pitch for each other's existing clients.

The issue is that customers lose the benefit of businesses competing for their work.

Be especially careful with:

• territory splits, such as you take Wellington, we'll take Christchurch
• customer splits, such as we won't approach your clients
• supplier splits, such as you use Supplier A, we'll use Supplier B
• bid rotation, where businesses take turns winning jobs
• cover pricing, where one business submits a deliberately high quote

There can be legitimate reasons to allocate responsibilities inside a genuine collaboration or partnership agreement. For example, if two businesses jointly deliver one project, it may be sensible to define who handles onboarding, training and support. The key difference is whether you're collaborating to deliver something real, or using the arrangement to avoid competing.

Collaboration Versus Cartel Risk

A collaboration is more likely to be defensible where:

• each business contributes something meaningful
• the collaboration or joint venture creates a product or service neither could easily deliver alone
• restrictions are limited to what the project genuinely needs
• customers still get clear information about who they're dealing with
• the arrangement is documented before work starts

The Commerce Act includes a collaborative activity exemption, but it doesn't automatically protect every joint project. If your collaboration involves a competitor and affects pricing, territories or customers, get advice before you rely on it.

What Should You Check Before Signing A Supplier Or Reseller Deal?

You should check whether the agreement limits competition more than necessary, especially around price, exclusivity, resale terms, information sharing and termination rights.

Use this deal checklist before you sign:

• Pricing: Does the deal set, fix or influence resale prices?
• Discounts: Can resellers freely offer discounts?
• Exclusivity: Is any exclusive right clear, limited and commercially justified?
• Territory: Does the territory clause support distribution, or does it divide markets with a competitor?
• Customers: Are there rules about who each party can approach?
• Supply Limits: Does the deal restrict who can be supplied, or who can buy?
• Competitor Contacts: Will commercially sensitive information be shared with competitors?
• Termination: Could supply be cut off because a reseller discounts or competes?
• Records: Is the commercial reason for any restriction recorded?

If a term feels like it stops someone competing, don't ignore that instinct. Sometimes the fix is simple, such as narrowing an exclusivity clause, changing mandatory pricing to recommended pricing, or adding performance targets.

Deal Clause Outline To Fill In

This outline isn't a finished legal document. It should be tailored to your business before you use it, because small wording changes in a supplier agreement can make a big difference under the Commerce Act.

1. Parties: Identify who is supplying, reselling, distributing or collaborating.
2. Products Or Services: Describe exactly what the arrangement covers.
3. Territory: State any sales area and why it's commercially needed.
4. Exclusivity: Explain whether rights are exclusive, non-exclusive or conditional on targets.
5. Pricing: State that resale prices are recommended only, if that's the intended model.
6. Sales Targets: Set measurable targets if exclusivity depends on performance.
7. Marketing And Brand Rules: Cover brand use, product claims and advertising standards without controlling resale price.
8. Information Sharing: Limit shared information to what the arrangement genuinely needs.
9. Term And Exit: Include a clear end date, renewal process and termination rights.
10. Compliance: Require both sides to comply with the Commerce Act 1986 and other relevant laws.

Templates can be useful as a starting point, but they often miss competition law issues because they don't know your market, your competitors or your bargaining position.

What Should You Do If A Deal Starts To Feel Anti-Competitive?

You should pause the discussion, avoid acting on the risky term, and get tailored advice before you continue.

Don't try to fix the issue by deleting emails or pretending the conversation didn't happen. That usually makes things worse. Instead, keep a clear record of what happened and take practical steps to reduce risk.

Steps To Take

1. Stop The Risky Conversation: If a competitor raises prices, territories, customers or bids, say you're not comfortable discussing that topic.
2. Make A File Note: Record the date, who was present, what was said and how you responded.
3. Don't Implement The Term: Avoid changing prices, customers or supply arrangements based on the discussion.
4. Review The Contract Draft: Mark any clauses that deal with pricing, exclusivity, territories, customers, supply limits or information sharing.
5. Get Tailored Advice: Ask whether the clause should be removed, narrowed, reworded or supported by a proper authorisation strategy.

In some cases, businesses can seek authorisation from the Commerce Commission where an arrangement may lessen competition but creates public benefits that outweigh the harm. That's a more involved process and isn't something to assume applies casually.

You should also separate Commerce Act risks from other legal obligations. For example, the Fair Trading Act 1986 deals with misleading or deceptive conduct, and the Consumer Guarantees Act 1993 can affect consumer-facing sales. Those laws matter too, but they don't replace the Commerce Act analysis.

The practical aim is simple: keep your deal commercially useful without crossing the line into coordination that limits competition.

Key Takeaways

• The Commerce Act 1986 applies to small business deals, not just large companies.
• Price fixing, market sharing and bid coordination are high-risk and can attract serious penalties.
• Exclusivity can be legal, but it should be clear, limited and commercially justified.
• You can usually recommend resale prices, but you shouldn't force, pressure or punish resellers over discounting.
• Collaborations with competitors need careful structuring, especially where pricing, customers or territories are involved.
• A tailored supplier, reseller or collaboration agreement can help you grow while keeping competition law risks under control.

If you'd like help with your supplier agreements, reseller terms, exclusivity clauses or competition law risk checks, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.