NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
5.3 Termination of the Franchise Agreement There are no franchise-specific requirements around termination or minimum notice periods under New Zealand law, and general commercial and contract law applies. Note, however, New Zealand contract and commercial law requirements, including a prohi - bition on unfair contract terms – see 7.4 Prohibited Provisions in Local Law . 6. Restrictions on Competition in Franchise Agreements 6.1 Treatment of Competition Restrictions in Franchise Agreements The Commerce Act 1986 prohibits various things, including the following. • The entering into of or giving effect to cartel provi - sions between competitors (Section 30). A cartel provision is a provision contained in a contract, arrangement or understanding between competi - tors (including potential competitors) for the supply or acquisition of goods or services which has the purpose, effect or likely effect of fixing prices, restricting output or allocating markets. Breach of the cartel prohibition is a criminal offence in New Zealand. • The entering into of or giving effect to a provision of a contract, arrangement or understanding (Sec - tion 27), or a person with substantial market power from engaging in conduct (Section 36), which has a purpose, effect or likely effect of substantially lessening competition in a relevant market. The Commerce Act was amended from 5 April 2023 to remove historic protections for IP licensing agree - ments and the enforcement of statutory IP rights. Previously, Section 36 (3) provided that a business does not take advantage of market power simply by enforcing a statutory IP right (eg, a patent, trade mark or copyright). Section 45 (1) also previously added that the Act’s other prohibitions do not apply to the entering into of IP agreements (such as licences, set - tlement and co-existence agreements) in so far as they contained a provision that authorises something that would otherwise be prohibited by an IP right, or
giving effect to such provisions. This could extend to restraints on operating areas, first- and third-line forc - ing, and other structural arrangements. These protections have now been removed, bringing New Zealand in line with Australia, though the Aus - tralian regime has more flexibility as it is permissive of “exclusive dealings”. There is considerable uncer - tainty about the extent to which the removal of the IP exception will impact the exercise of IP rights in New Zealand. The Commerce Act is currently under review, including because of issues arising since the historic IP exceptions were removed; this is particularly rel - evant to business structures such as franchising and licensing. In August 2025, the Minister of Commerce and Consumer Affairs indicated changes to the frame - work around collaboration and the potential to include “class exemptions”. Details are not yet known, but this may impact franchise models given the inherent issues following the 2023 removal of the IP exception. As can often be the model in franchise structures, if the franchisor is itself operating in the market and also selling goods or providing services in competi - tion with its franchisees, they may be competitors for the purposes of the Commerce Act. Often, franchise agreements contain restrictions that could therefore be viewed as potential cartel provisions (ie, territorial, field-of-use or customer restraints). These provisions may breach the Commerce Act’s cartel prohibition or prohibition on anti-competitive arrangements unless one of the exceptions applies. Businesses with substantial market power that enforce statutory IP rights in a way that has the purpose and/ or effect of substantially lessening competition in a market are now subject to the Section 36 misuse of market power prohibition. An owner of IP rights might have a substantial degree of power in a market simply by virtue of its ownership of those rights, especially if there are no acceptable substitutes for the products/ services that the owner supplies in that market (for example, where the party is the first to patent a par - ticular technology). The Commerce Commission considers this situation in its Guidelines on the Application of Competition Law to Intellectual Property Rights , and notes that a
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