NEW ZEALAND Law and Practice Contributed by: Liz Blythe, Troy Pilkington, Emma Peterson and Craig Shrive, Russell McVeagh
acting) in a certain way is enough. Therefore, discus - sions with outsourcing and technology partners that are also competitors must not “spill over” into infor - mal arrangements about how each party competes for customers/suppliers. Parties should also avoid sharing commercially sensitive information (such as pricing information) with each other in the areas in which they compete. The Commerce Act contains certain exemptions from the cartel prohibition, including the “vertical supply contract” exception, which can apply to cartel pro - visions contained in supply contracts (such as IT outsourcing contracts). To rely on this exception, the cartel provision must be contained in a contract and “relate to” the goods or services being supplied, and not have the “dominant purpose of lessening compe - tition” between the parties. However, even where an exception applies, parties must still consider Section 27 of the Commerce Act, which prohibits entering into or giving effect to any contract, arrangement or under - standing that has the purpose, effect, or likely effect of substantially lessening competition in a market. This prohibition applies irrespective of whether the vertical supply contract exception applies. This is an area to watch in New Zealand, as IT service providers are increasingly outsourcing their IT opera - tions to service providers who may also be competi - tors in some markets. 2.2 Industry-Specific Restrictions Although there is no legislation that applies to out - sourcing and technology transactions generally in New Zealand, specific guidance is provided for these arrangements by particular regulators and in particular industries. These include financial services, the public sector, certain infrastructure providers, and regulated businesses more generally. Financial Services The financial services sector in New Zealand is regu - lated by the Financial Markets Authority (FMA) and subject to the Financial Markets Conduct Act 2013 (FMCA) and other legislative requirements. The FMCA prescribes liability for compliance with statutory duties where brokers and financial advisers outsource their services. If a broker contracts out broking services
to another business (eg, to a custodian), the broker remains responsible for broking services to the client. The person providing the outsourced broking services is required to register on the Financial Service Pro - viders Register as providing broking services. Finan - cial advisers must also take all reasonable steps to ensure that the person or entity to whom they have outsourced services complies with their duties under the FMCA. The FMA’s 2024 guidance note advises that a reasonable level of due diligence be carried out when outsourcing client money or property services to third parties. Banks Large New Zealand banks are generally subject to a standard condition of registration that requires banks to continue to meet specific outcomes, despite out - sourcing. The Reserve Bank of New Zealand (RBNZ) – the pru - dential regulator of New Zealand banks – maintains an outsourcing policy (the current policy (BS11) was issued in September 2022). The RBNZ has the power to take enforcement action against any New Zealand bank to ensure compliance with the outsourcing pol - icy as a condition of registration. Among the relevant requirements under the RBNZ outsourcing policy are that, depending on the circumstances of the outsourc - ing, New Zealand banks seeking to implement any outsourcing arrangement must: • have the relevant risk mitigation requirements (as specified for particular circumstances in the out - sourcing policy) in place at all times; • have robust back-up capability in place if the arrangement is with another related or independent third party; • ensure that the outsourcing arrangement contains the contractual terms prescribed in the outsourcing policy; • obtain non-objection from the RBNZ before enter - ing into the arrangement in some cases; • maintain, annually review, and provide a compen - dium of outsourcing arrangements to the RBNZ on request; and • have a separation plan (which is tested annually) providing the steps a bank would take to ensure the services covered by the outsourcing arrange -
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