NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
refusal to license to a competitor or even a potential competitor may be a misuse of market power in some circumstances. New Zealand law also prohibits suppliers from speci - fying a minimum resale price or from taking actions to enforce a specified resale price (including inducing or attempting to induce another person to not sell at a price less than that specified). 6.2 Exclusive Territories and Competing Businesses The permissibility of including and enforcing exclu - sive territories in franchise agreements depends on the specific circumstances and the extent of restric - tions imposed. Exclusive territories in franchise agreements may trig - ger three prohibitions under the Commerce Act 1986: • the cartel prohibition; • the general prohibition on anti-competitive provi - sions; and/or • the misuse of market power prohibition. Cartel Prohibition If a franchisor and franchisee are competitors for the supply of goods or services, an exclusive territory clause may amount to market allocation, which is a form of cartel conduct. This is prohibited unless an exception applies. The most relevant exception to the cartel prohibition for exclusive territories is the collaborative activity exception. The collaborative activity exception applies where: • the franchisor and franchisee are engaged in a col - laborative activity; • the dominant purpose of the collaborative activity is not to lessen competition between the parties; and • the exclusive territory clause is reasonably neces - sary for the purpose of the collaborative activity. Franchise agreements may qualify as collaborative activities. However, franchisors must ensure that the clause is reasonably necessary for the purpose of
the collaborative activity. This involves a fact-specific assessment of the exclusive territories’ scope and duration, and whether less restrictive alternatives could achieve the same outcome. If exclusive territories extend beyond the term of the agreement (eg, one year), the cartel prohibition does • the exclusive territories were reasonably necessary to achieve the aims of that collaborative activity; and • the agreement did not end because its dominant purpose became the lessening of competition between the franchisor and franchisee. The other relevant exception is the vertical supply contract exception. For the vertical supply contract exception to apply to exclusive territories: not apply if three conditions are met: • the collaborative activity has ended; • the contract must be between a supplier or likely supplier of goods or services and a customer or likely customer of that supplier; • the cartel provision must relate to the supply or likely supply of the goods or services to the cus - tomer or likely customers; • the cartel provision must not have the dominant purpose of lessening competition between any two or more of the parties to the contract; • the franchise agreement must involve the fran - chisor supplying goods or services to the fran - chisee; and • the exclusive territory clause must relate to that supply and must not have the dominant purpose of reducing competition between the franchisor and franchisee. General Prohibition on Anti-Competitive Provisions The exclusive territories must also be assessed under the general prohibition on provisions in contracts, arrangements, understandings or covenants that have the purpose, effect or likely effect of substantially less - ening competition in a relevant market. The relevant market is based on a market definition that best iso - lates the key competition concerns.
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