What Is a Distributor? Legal Guide for New Zealand Businesses

If you’re growing a product-based business, you’ll probably hit a point where doing all your sales yourself starts to feel… limiting.

Maybe you’ve got steady demand in other regions of New Zealand, you’re getting enquiries from overseas, or you’re simply tired of packing orders and chasing invoices when you’d rather be improving your product.

That’s usually when you start asking what a distributor is, and whether you should use one.

This guide provides general information only and doesn’t take into account your specific situation. It’s not legal advice. If you’re considering appointing a distributor, it’s worth getting advice on the right structure and agreement for your business.

In this guide, we’ll break down what a distributor is (in plain English), how distributors differ from agents, resellers and wholesalers, and what you should lock in legally before you hand over your product to someone else to sell.

What Is A Distributor (And What Do They Actually Do)?

In most commercial arrangements, a distributor is a business that buys your products (often at a wholesale price) and then sells them to customers or retailers in their own name.

That means the distributor typically:

• purchases stock from you (rather than simply finding customers for you)
• sets their own resale price (within any legal limits around pricing conduct)
• markets and sells the product through their own channels
• takes on some commercial risk (for example, if the product doesn’t sell as expected)
• handles logistics such as storage, delivery to retailers, and sometimes after-sales support

From a small business perspective, the big advantage is leverage. A distributor can help you scale sales without you needing to build a full in-house sales team or warehouse operation.

But here’s the trade-off: once someone else is selling your product, your reputation is in their hands too. That’s why a properly drafted distribution agreement matters.

Distributor Vs Agent Vs Reseller: What’s The Difference?

A lot of confusion comes from the fact that different industries use these terms differently. But legally and commercially, the differences can matter (especially when it comes to liability, customer promises, and who “owns” the relationship).

Distributor

• Typically buys stock from you and resells it.
• Sells in their own name and usually invoices the customer.
• Often has more freedom in how they market and sell (unless your contract limits this).

Agent

• Usually does not buy the stock.
• Finds customers and facilitates sales on your behalf.
• You generally invoice the customer, and the agent earns a commission.

If you’re using an agent-type structure, it’s common to document it as an Sales Agency Agreement so everyone is clear on commission, authority limits, and who is responsible for what.

Reseller / Retailer

• Often buys product and resells it (like a distributor), but typically on a smaller scale.
• May be one of many stockists rather than your dedicated channel partner.

Wholesaler

• Often similar to a distributor, but the term “wholesaler” can imply a focus on bulk supply to retailers, sometimes with less emphasis on marketing or brand-building.

Why does this matter? Because the label you use isn’t as important as what the agreement actually says. If your “distributor” is making promises to customers that you end up having to honour, you want the contract to address that risk upfront.

When Should You Use A Distributor In New Zealand?

There’s no one-size-fits-all answer, but using a distributor can make a lot of sense if:

• You want to expand into new regions without opening new premises.
• Your business is product-based and you can manufacture or supply at scale.
• You want more predictable cashflow by selling in bulk to one customer (the distributor), rather than many smaller customers.
• You need help getting into retail chains or specialist stores where relationships matter.
• You’re planning international expansion and need a local partner who understands that market.

On the other hand, a distribution model might not suit you if:

• Your margins are already tight and wholesale pricing makes the numbers difficult.
• Your brand relies on a highly controlled customer experience (because you’ll have less direct control).
• You’re not ready operationally to supply consistent quantities or handle product issues at scale.

A helpful way to think about it is: you’re not just choosing a sales channel - you’re choosing a long-term commercial relationship.

What Should Be In A Distribution Agreement?

If you’re serious about appointing a distributor, your next question should be: what needs to be written down?

A distribution agreement is the document that sets expectations and protects you if things go wrong. It also helps avoid misunderstandings like “I thought I had exclusivity” or “I thought you were covering marketing costs”.

Most distribution agreements cover the following key areas.

1. Territory And Exclusivity

Will the distributor be allowed to sell:

• Across all of New Zealand, or only specific regions?
• Online, in-store, or both?
• To certain customer types only (for example, retailers but not direct-to-consumer)?

And will they be the exclusive distributor in that territory?

Exclusivity can be attractive (distributors often want it), but it increases your risk if they underperform. If you do offer exclusivity, it’s common to tie it to performance targets and a right to terminate or convert to non-exclusive if targets aren’t met.

2. Products, Ordering, And Supply Terms

You’ll want clarity on:

• Which products are included (and how new products will be added)
• Minimum order quantities (if any)
• Lead times and forecasting requirements
• How stock shortages are handled
• Who pays shipping, insurance, and handling

This is also where you want your commercial terms to line up with your broader Terms of Trade (for example, payment timing, credit limits, and risk transfer).

3. Pricing And Payment

In a typical distributor arrangement, you set the wholesale price and the distributor sets their resale price.

Be careful about any arrangement that effectively forces a fixed minimum resale price. In New Zealand, resale price maintenance is generally prohibited under the Commerce Act 1986, and pricing controls can create competition law risk depending on how they operate in practice. Many suppliers use recommended resale pricing (without making it mandatory) and focus instead on brand positioning, marketing standards, and where products can be sold.

Your agreement should also cover:

• Payment terms (prepayment, 7 days, 20th of next month, etc.)
• Late payment interest or remedies
• Credit checks and credit limits
• Whether you can suspend supply if invoices aren’t paid

4. Brand Use And Intellectual Property

Your distributor will usually need to use your brand assets - logos, packaging designs, product photos, and marketing content.

This should be licensed properly and limited to the purpose of selling your products. If you don’t spell this out, you can end up with messy disputes about who owns what and what they’re allowed to keep using after termination.

If IP ownership or licensing is a big part of your arrangement (for example, they’re creating marketing materials or localised branding), an IP Licence can be a clean way to document the permissions and boundaries.

5. Marketing And Sales Standards

Even though a distributor sells in their own name, your brand reputation is still on the line.

Many agreements include rules around:

• How the brand is displayed and described
• What claims can (and can’t) be made in marketing
• Approval processes for major campaigns
• Minimum marketing commitments (optional, but common in exclusive deals)

This is especially important because advertising and product claims in New Zealand are regulated, including under the Fair Trading Act 1986 (which prohibits misleading or deceptive conduct).

6. Customer Issues, Returns, And Warranties

One of the most common “surprise” problems for suppliers is what happens when customers complain.

Your distributor may be the seller of record - but the customer may still blame your brand, and the distributor may try to push responsibility back to you.

Your agreement should cover:

• Who handles customer complaints
• Who pays for returns or replacements
• What happens with defective stock
• Warranty processes and timeframes

Depending on the circumstances, the Consumer Guarantees Act 1993 may apply to consumer sales (usually at the retailer/distributor level), and the Fair Trading Act 1986 can apply broadly to business conduct and representations. Clear contractual allocation of responsibilities helps manage these risks in a practical way.

7. Term, Renewal, And Termination

You’ll want to be clear on:

• How long the agreement runs for
• Whether it auto-renews
• How either party can terminate (for convenience vs for breach)
• Immediate termination triggers (e.g. insolvency, serious breach, reputational harm)

Also think about what happens after termination:

• Can they sell through remaining stock for a limited period?
• Do they have to stop using your branding immediately?
• Do they need to return marketing materials or confidential information?

In some cases, these post-termination obligations are reinforced with a tailored Non-Disclosure Agreement (or confidentiality clauses within the main agreement) to reduce the risk of your supplier lists, pricing, or product roadmap being used elsewhere.

What Laws Do You Need To Keep In Mind?

Even with a solid contract, your distribution setup still needs to sit within New Zealand’s legal framework.

Here are some of the key legal areas that commonly come up for distributors and suppliers.

Fair Trading And Product Claims

The Fair Trading Act 1986 is a big one. It applies to marketing and sales practices, and it broadly prohibits misleading or deceptive conduct.

Practically, this means you should be careful about:

• Claims about performance, results, or “guaranteed” outcomes
• Before-and-after advertising
• Country-of-origin claims (especially if parts are imported)
• Pricing representations (e.g. “was/now” pricing that isn’t accurate)

Even if your distributor is the one running ads, your brand can still be pulled into the mess if the marketing is wrong - so it’s worth building marketing rules into your agreement.

Consumer Guarantees And After-Sales Support

The Consumer Guarantees Act 1993 often applies where products are sold to consumers in trade. While the distributor/retailer is usually the direct seller, your contract should set out the practical process for defects, replacements, and reimbursements.

If your products are supplied only for business use, the CGA can sometimes be contracted out of - but only if strict legal requirements are met (including that the supply is in trade between businesses, the goods or services are of a kind ordinarily acquired for business use, and the contracting-out is clearly agreed in writing). Whether that’s appropriate depends on how your product is sold and who it’s sold to - it’s a good example of where tailored legal advice really matters.

Privacy And Customer Data

Some distribution arrangements involve sharing customer information, warranty registrations, mailing lists, or sales data. If personal information is being collected, used or disclosed, the Privacy Act 2020 can apply.

If you’re collecting customer info through your website or warranty system, having a clear Privacy Policy (and aligning it with what the distributor is doing) helps you stay consistent and reduce risk.

Competition And Restraints

Distribution deals often include restrictions - like where the distributor can sell, whether they can sell competing products, or who they can sell to.

Some restrictions are commercially reasonable, but they need to be drafted carefully. Overly broad restraints can be hard to enforce and may create regulatory risk depending on their effect in the market.

This is another reason it’s risky to copy-and-paste a template agreement from overseas - New Zealand law and enforcement expectations won’t always match.

Common Mistakes Small Businesses Make With Distributors

Distributor relationships can be great - but the problems tend to show up when expectations aren’t written down early.

Here are some common pitfalls we see for growing businesses.

Relying On A Handshake Deal

You might trust the distributor (and they might be genuinely great), but memories fade and businesses change.

If there’s no written agreement, disputes often turn into “your word vs theirs” - and that’s expensive and distracting.

Granting Exclusivity Too Easily

Exclusivity can motivate a distributor to invest in your product, but it can also trap you.

If you’re offering exclusivity, consider:

• Performance milestones
• Minimum purchase requirements
• Short initial terms with renewal based on results
• Clear termination rights

Not Controlling Online Sales Channels

Many brands want to protect pricing and reputation online. If your distributor sells on marketplaces or runs discount-heavy campaigns, it can upset other stockists and dilute your brand.

Your agreement should be clear about where the distributor can sell, and what approvals (if any) are needed.

Forgetting About IP And Content Ownership

If your distributor creates local marketing content, who owns it? Can you reuse it later? Can they keep using it after the relationship ends?

It’s much easier to agree on these things upfront than fight about them later.

Not Planning For Growth Or Exit

Imagine your product takes off and you want to restructure, sell the business, or bring distribution in-house. A poorly drafted distribution agreement can make those moves harder than they need to be.

Good contracts don’t just “protect you if something goes wrong” - they also keep your options open if things go right.

Key Takeaways

• A distributor typically buys your products and resells them in their own name, so it’s important to understand the model before you scale.
• Distributors are different from agents: agents usually sell on your behalf for commission, while distributors generally purchase and resell stock.
• A well-drafted distribution agreement should clearly cover territory, exclusivity, supply terms, pricing/payment, brand and IP use, marketing standards, customer issues, and termination.
• Key New Zealand laws to keep in mind include the Fair Trading Act 1986, the Consumer Guarantees Act 1993, and the Privacy Act 2020.
• Common mistakes include relying on handshake deals, granting exclusivity without performance targets, and failing to control brand use and sales channels.
• Because distribution arrangements affect your cashflow, reputation, and growth options, it’s worth getting the agreement tailored rather than relying on a generic template.

If you’d like help setting up a distribution arrangement or getting your agreement drafted or reviewed, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.