Agreements between businesses are a normal and important part of how markets work. But some agreements harm competition, resulting in higher prices, fewer choices and lower quality of goods and services for consumers.
Agreements that substantially lessen competition are illegal under section 27 of the Commerce Act. These agreements could be in the form of a written contract or an informal understanding. Whether an agreement is deliberately anti-competitive or not, if it has the purpose, effect, or likely effect of substantially lessening competition in a market, it is illegal. Even if the agreement is not put into practice, the act of reaching (or attempting to reach) an anti-competitive agreement is also illegal.
Anti-competitive agreements that fall under section 27 include businesses taking joint steps to prevent new competitors from entering a market. Read our case study for an example.
Other forms of anti-competitive agreements, such as cartel conduct, are covered under section 30 of the Commerce Act.
Agreements and behaviour that are exempt from the Commerce Act
There are some exceptions to section 27, such as partnership agreements and employment contracts.
This is because sometimes there are circumstances where a type of agreement or behaviour is unlikely to substantially lessen competition. In other cases, the agreement or behaviour may result in public benefits that are considered more important than any anti-competitive effects.
Authorising anti-competitive transactions that will likely benefit New Zealand
Under the Commerce Act, the Commission can authorise an anti-competitive agreement where we are satisfied that the benefits to the public outweigh the competitive harm of the agreement.
