Cartels Bill to be amended to clarify franchising issues

Concerns that the Cartels Bill could have badly affected franchising are to be addressed following submissions to the Ministry of Business, Innovation and Employment from the Franchise Association and other concerned parties.

The Commerce (Cartels and Other Matters) Amendment Bill (the Cartels Bill) is aimed at promoting competition for the greater benefit of the consumer by prohibiting cartels, which come about when competitors agree to fix prices, restrict output or allocate markets. Franchise agreements commonly contain provisions which might well have fallen foul of the legislation – see explanation here – and especially have affected restraint of trade clauses.

Earlier in the year, the Franchise Association (FANZ) wrote to the Ministry (MBIE) to draw the Ministry’s attention to the fact that otherwise legitimate restraints of trade relating to a collaborative activity (ie, a franchise) will be prohibited after the end of that collaborative activity (ie, after the termination of the franchise agreement). FANZ’s Legislation Subcommittee was of the view that these proposed provisions would materially and adversely affect many franchised businesses.

FANZ has now announced that the Commerce and Consumer Affairs Minister, Mr Paul Goldsmith, has agreed to amend the Cartels Bill to make clear how the Cartels Bill will relate to restraint of trade provisions in franchising agreements.

‘FANZ wishes to express its sincere thanks to MBIE, the Minister and Senior Policy staff for dealing with this matter so promptly and effectively,’ say FANZ chairman Brad Jacobs and CEO Robyn Pickerill.

The Association is the peak body representing franchising in New Zealand, and has an increasingly important role in analysing the sometimes unintended impact of new legislation on franchisors and franchisees. Funded by its members, FANZ has recently celebrated its 20th anniversary – details on membership can be found here.

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