What Is Exclusive Dealing? (2026 Updated)

Exclusive dealing can sound like a fancy commercial strategy reserved for big brands and nationwide distributors.

In reality, it comes up all the time for New Zealand businesses of every size - from a café that agrees to stock only one drinks supplier, to an ecommerce store that’s required to sell a particular product range “exclusively”, to a franchisor controlling what franchisees can buy and from whom.

This 2026 update reflects the current focus on competition and fair trading compliance in New Zealand, and what small business owners should be thinking about before they lock themselves into (or impose) exclusivity arrangements.

Let’s break down what “exclusive dealing” actually means, when it’s risky, and how you can structure agreements to protect your business from day one.

What Does Exclusive Dealing Mean In Practice?

At a high level, exclusive dealing is when one business places restrictions on who another business can buy from, sell to, or deal with.

It usually shows up as “you can deal with us, but only if you also agree to…” conditions.

Common real-world examples include:

• Exclusive supply: you agree to buy a product or input only from a particular supplier (for example, a hospitality venue purchasing coffee beans exclusively from one roaster).
• Exclusive distribution: you’re appointed as the only distributor for a region, or you agree to sell only one brand within a category.
• Exclusive dealing with customers: a supplier tells you that you can sell their products only if you don’t also sell a competitor’s products.
• Restrictions on who you can supply: you are prevented from selling to certain customers (for example, not selling to a big-box retailer, or not selling online).
• Bundling / tying arrangements: you can only buy Product A if you also buy Product B (or you must buy a minimum mix of products to get access to a premium product line).

Exclusive dealing isn’t automatically illegal in New Zealand. In many industries it’s completely normal, and sometimes it can even be pro-competitive (for example, giving a distributor enough certainty to invest in marketing and support).

But the key is that exclusivity can also be used in ways that damage competition - and that’s where the legal risks come in.

Is Exclusive Dealing Legal In New Zealand?

In New Zealand, exclusive dealing is mainly assessed under the Commerce Act 1986, which is designed to promote competition in markets for the long-term benefit of consumers.

As a general rule, exclusive dealing is a problem if it has the purpose, effect, or likely effect of substantially lessening competition in a market.

That sounds technical, but the practical takeaway is this:

• If an exclusivity arrangement is just a commercial “deal term” between businesses with plenty of alternatives in the market, it may be low risk.
• If an exclusivity arrangement locks up a meaningful part of the market, shuts out competitors, or makes it hard for customers to choose alternatives, the risk increases.

Important: other competition law issues can overlap with exclusive dealing, such as:

• Cartel conduct (price fixing, restricting output, allocating markets).
• Resale price maintenance (generally, suppliers shouldn’t dictate the minimum price resellers must charge).
• Misuse of market power (conduct by a business with substantial market power that has the purpose, effect, or likely effect of substantially lessening competition).

Exclusive dealing can also create non-competition risks outside of the Commerce Act. For example, if exclusivity terms are unclear or heavy-handed, they may cause disputes under contract law, or create relationship breakdowns that are expensive to unwind.

That’s why it’s worth getting the agreement structure right, not just the “headline commercial deal”. A properly drafted Supply Agreement can help spell out exactly what “exclusive” means (and what happens if it isn’t workable).

What Makes Exclusive Dealing Risky (Or More Likely To Be Challenged)?

If you’re trying to work out whether an exclusive dealing clause is “fine” or a potential problem, it helps to think like a regulator (and like the other side of the market).

Here are some practical factors that often increase legal risk.

1) Market Power And Market Share

The more market power a business has, the more carefully exclusivity needs to be handled.

If you’re a small supplier trying to sign up one retailer exclusively, that’s usually very different to a dominant supplier requiring most retailers to deal only with them.

2) Length And Scope Of Exclusivity

Exclusivity that runs for a short period (say, 3–6 months) may be easier to justify than exclusivity that effectively locks someone in for years.

Also look at scope:

• Is it exclusive for one product line or a whole category?
• Is it exclusive in one region or nationwide?
• Does it prevent dealing with all competitors or only direct substitutes?

3) Barriers To Entry And Switching Costs

Exclusive dealing becomes more concerning where competitors can’t realistically enter the market or where customers can’t easily switch.

For example, if a retailer would need to refit premises, retrain staff, replace equipment, or rebrand to change suppliers, that “lock-in” effect can matter.

4) Foreclosure Of Competitors

A big red flag is where exclusivity arrangements collectively “tie up” the key routes to market - meaning competitors struggle to access suppliers, distributors, or customers.

This can happen unintentionally too, especially in smaller industries where there are only a handful of meaningful distribution channels.

5) Conditions That Feel Like Pressure (Rather Than Choice)

Exclusive dealing often involves conditional supply. The more it feels like “take it or leave it” (especially where there aren’t realistic alternatives), the more carefully it should be reviewed.

Even where something is technically lawful, overly aggressive terms can still be a commercial risk - you may lose goodwill, attract complaints, or find the contract gets challenged and becomes difficult to enforce.

Common Exclusive Dealing Clauses (And How To Draft Them More Safely)

Exclusivity can be valuable, but it needs to be clearly defined and commercially realistic. A lot of disputes happen because one party thinks “exclusive” means “preferred”, and the other thinks it means “100% locked in”.

Here are clauses we commonly see, and what you should consider.

Exclusive Supply (Customer Buys Only From You)

If your customer must buy exclusively from you, your agreement should be crystal clear on:

• Products covered: list SKUs, ranges, or categories.
• Territory: where exclusivity applies (if relevant).
• Minimum purchase commitments: if you want exclusivity, do you need a minimum order volume to make it worthwhile?
• Service levels: what happens if you can’t supply on time or at agreed quality?
• Exceptions: can they buy elsewhere if you’re out of stock, prices change beyond an agreed mechanism, or there’s an emergency?

This is often documented alongside broader supply and payment terms, so your Terms Of Trade may also need to align with the exclusivity promise (especially around ordering, delivery, risk, and credit terms).

Exclusive Distribution (You’re The Only Seller In A Region)

Exclusive distribution is common when a supplier wants a distributor to invest in marketing, sales, warehousing, or support.

Key drafting points include:

• Performance obligations (e.g. sales targets, marketing commitments, reporting).
• Brand and IP controls (how you can use trademarks, brand assets, and advertising materials).
• Online sales rules (for example, whether you can sell on marketplaces).
• What happens on termination (stock sell-off, customer handover, return of materials).

For many businesses, this is best handled in a tailored Distribution Agreement, because distribution relationships often involve more than just “buy and resell”.

Exclusive Purchasing Or Approved Supplier Lists

Sometimes exclusivity is indirect. For example, you’re “free” to buy elsewhere, but only approved suppliers meet the spec (or only purchases from approved suppliers count toward rebates).

That can be legitimate - but make sure it’s not drafted in a way that’s misleading, unfair, or commercially impossible to comply with.

It’s also worth checking whether the arrangement could create consumer-facing issues, especially if it affects product quality claims, warranty handling, or returns. If your supply chain terms impact how you honour guarantees, your approach should align with your consumer law settings, including any warranties messaging and processes.

Exclusivity In Franchising

Franchising frequently involves exclusivity - including approved suppliers, mandatory products, and restrictions on selling competing goods.

This can make sense (franchise systems rely on consistency), but it needs careful legal handling because the relationship is long-term and operationally detailed.

If you’re entering a franchise system (or building one), the exclusivity and supply terms should be consistent across the key documents, including the Franchise Agreement.

What Should You Do Before You Sign (Or Impose) An Exclusive Dealing Arrangement?

When you’re excited about a new supplier, distributor, or major customer, it’s tempting to treat exclusivity like a “simple yes/no”.

But you’ll save yourself a lot of stress by doing a few checks upfront.

1) Be Clear On The Commercial Goal

Ask yourself: what problem is exclusivity solving?

• Is it to justify investment (marketing spend, staff, equipment, territory build-out)?
• Is it to protect brand reputation and quality control?
• Is it to prevent “free riding” (where another reseller benefits from your marketing work)?

When the goal is clear, it’s easier to draft narrower, more defensible clauses that don’t overreach.

2) Define The Market Reality (Even Informally)

You don’t need to write an economic report for every exclusivity clause, but you should understand the basics:

• Who are the main alternatives (other suppliers/distributors/customers)?
• How easy is it to switch?
• Is this arrangement likely to block others from competing meaningfully?

If you’re not sure, that’s a good sign you should get tailored advice before committing.

3) Make Sure The Contract Matches The Verbal Deal

A lot of disputes start with “but you said…”

If exclusivity is important, it should be properly set out in writing with:

• the exact scope of exclusivity
• how long it lasts
• how it can be renewed
• what triggers loss of exclusivity
• what happens if either party can’t perform

It’s also worth checking the agreement style. If you’re being asked to sign something that’s heavily one-sided or “take it or leave it”, you may be dealing with a standard form contract - which is a good reason to slow down and get it reviewed.

4) Build In Practical Safety Valves

Even when exclusivity is commercially fair, life happens: stock shortages, shipping delays, quality issues, demand spikes, pricing shifts, and business model changes.

Practical “safety valve” clauses can include:

• Trial periods before full exclusivity kicks in.
• Step-down exclusivity (exclusive for 6 months, then non-exclusive unless targets are met).
• Carve-outs for out-of-stock events or emergencies.
• Termination rights that are fair and workable.
• Dispute resolution steps to keep issues from escalating.

Often the best protection is simply having a properly drafted agreement (rather than trying to patch clauses into an email chain). If you’re unsure, a Contract Review can help identify whether an exclusivity clause is reasonable, enforceable, and aligned with your actual bargaining position.

5) Don’t Forget Your Other Legal Obligations

Exclusive dealing is a competition law topic, but your business still needs to meet its broader obligations too.

Depending on what you’re selling, how you market it, and how you contract with customers, you may also need to consider:

• Fair Trading Act 1986 (misleading or deceptive conduct, unsubstantiated representations, unfair practices).
• Consumer Guarantees Act 1993 (guarantees for consumer purchases, repairs, refunds, and remedies).
• Unfair contract terms risk for certain standard form consumer contracts.

Exclusive supply arrangements sometimes tempt businesses to overpromise (“we’re the only authorised seller”, “only genuine product”, “exclusive warranty”) - so it’s worth checking your advertising and sales wording is accurate and can be backed up.

Key Takeaways

• Exclusive dealing is when a business places restrictions on who another business can buy from, sell to, or deal with - including exclusive supply, exclusive distribution, and “only if” conditions.
• Exclusive dealing isn’t automatically illegal in New Zealand, but it can create risk under the Commerce Act 1986 if it has the purpose, effect, or likely effect of substantially lessening competition.
• Risk increases where a business has significant market power, the exclusivity is broad or long-term, switching is difficult, or competitors are effectively shut out of key routes to market.
• Well-drafted exclusivity clauses should clearly define scope, products, territory, duration, performance obligations, exceptions, and what happens if supply or service levels can’t be met.
• Before signing (or imposing) exclusivity, it’s smart to sanity-check the market context, ensure the written agreement matches the real deal, and build in practical “safety valves”.
• Exclusive dealing can overlap with other legal risks - including resale price maintenance, misleading advertising, and consumer law obligations - so your contracts and marketing should be aligned.

If you’d like help reviewing or drafting an exclusivity arrangement, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.