New Cartel laws
Amendments to the Commerce Act significantly expand the scope of prohibited cartel conduct. There are also two new exceptions. However, it is important to check existing contracts prior to the expiry of the nine month transitional period on 14 May 2018 because certain criteria must be met before the exceptions apply.
What contracts could be affected?
Any distribution agreements, joint ventures, franchise agreements, or any other agreements, arrangements, or understandings between two or more competitors that restrict output or allocate markets. This is likely to include:
- Franchise arrangements if the franchisor runs a company-owned store because the franchisor is technically a competitor with its franchisees.
- Distribution arrangements if the supplier also sells the products online, for example.
- Joint ventures that deal with the geographic areas in which parties will operate or how classes of customer will be allocated between the parties.
There are two important new exceptions for:
- provisions in vertical supply contracts (likely to be applicable to franchise and distribution agreements)
- collaborative activity (likely to be applicable to joint ventures)
In most cases, these new exceptions will ensure that pro-competitive business arrangements are protected, but the exceptions do need to be considered on a case by case basis to ensure the required criteria are met.
There is also a new clearance regime for collaborative activity. The regime enables parties to obtain clearance from the Commerce Commission for an arrangement that includes a cartel provision.
Please contact Sarah Davis if you would like advice on whether any arrangements you are party to are captured by the new cartel provisions and if so, whether an exception applies, or if you would like further information about the clearance regime.