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Commerce Act 1986

Restrictive trade practices - Contracts, arrangements, understandings, or covenants substantially lessening competition

28A: Certain grocery-related covenants are treated as prohibited and unenforceable

You could also call this:

"Some contracts that stop others from opening grocery stores are against the law"

Illustration for Commerce Act 1986

If a big grocery store company has a contract that stops others from building a store, it might be against the law. This law applies to companies like Foodstuffs and Woolworths, and it says they cannot have contracts that stop others from competing with them. You can read more about this in section 27 and section 28.

A contract can be against the law if it stops someone from building a store that sells food or other things that people buy at a grocery store. This includes stores that sell bread, dairy products, or meat. The law calls these stores "retail grocery stores".

There are some exceptions to this law, like if the contract is necessary for environmental reasons, as described in the Fuel Industry Act 2020. You can also read about exceptions in section 58 and section 65A.

A company is considered to have an interest in a contract if they signed it, or if they made someone else sign it, as described in section 28(6) and section 28(5). This law is part of a bigger set of rules that help make sure companies compete fairly with each other. You can read more about this in section 61(6).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS713157.

Topics:
Business > Fair tradingMoney and consumer rights > Consumer protection
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28: Covenants substantially lessening competition prohibited, or

"It's against the law to make someone promise to do something that reduces competition in a market."

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28B: Process for voluntary removal of grocery-related covenant from register of land, or

"How to remove a grocery agreement from a land record"

Part 2Restrictive trade practices
Contracts, arrangements, understandings, or covenants substantially lessening competition

28ACertain grocery-related covenants are treated as prohibited and unenforceable

  1. A covenant to which this section applies must be treated, for the purpose of section 27 or 28 (as the case may be), as having the purpose, or as having or being likely to have the effect, of substantially lessening competition in the relevant market.

  2. This section applies to any of the following in which a designated grocery retailer has an interest:

  3. a restrictive or positive covenant that has the purpose, or has or is likely to have the effect, of impeding the development or use of land or a site as—
    1. a retail grocery store; or
      1. any other retail store that is likely to compete with a retail grocery store operated by the designated grocery retailer:
      2. a restrictive or positive covenant, and the provisions of any other contracts, arrangements, understandings, or covenants, if—
        1. the restrictive or positive covenant has 1 or more of the same parties as the contract, arrangement, understanding, or covenant; and
          1. taken together, the restrictive or positive covenant and the provisions have the purpose, or have or are likely to have the effect, of impeding the development or use of land or a site as—
            1. a retail grocery store; or
              1. any other retail store that is likely to compete with a retail grocery store operated by the designated grocery retailer:
            2. an exclusivity covenant or other provision in a lease that has the purpose, or has or is likely to have the effect, of impeding another person from operating—
              1. a retail grocery store; or
                1. any other retail store that is likely to compete with a retail grocery store operated by the designated grocery retailer:
                2. an exclusivity covenant or other provision in a lease, and the provisions of any other contracts, arrangements, understandings, or covenants, if—
                  1. the lease has 1 or more of the same parties as the contract, arrangement, understanding, or covenant; and
                    1. taken together, the exclusivity covenant or other provision in the lease and the provisions have the purpose, or have or are likely to have the effect, of impeding another person from operating—
                      1. a retail grocery store; or
                        1. any other retail store that is likely to compete with a retail grocery store operated by the designated grocery retailer.

                      2. However, this section does not apply to—

                      3. a covenant that is reasonably necessary for environmental impact reasons connected with a retail fuel site within the meaning of the Fuel Industry Act 2020; or
                        1. a covenant in respect of which the Commission has granted an authorisation under section 58 or given a clearance under section 65A.

                          1. In this section, unless the context otherwise requires,—

                            covenant means any covenant or other provision referred to in subsection (2)

                              designated grocery retailer means all of the following:

                              1. Foodstuffs North Island Limited, Foodstuffs South Island Limited, and Woolworths New Zealand Limited:
                                1. a person that is designated as a designated grocery retailer by the Governor-General by Order in Council made under section 28C:
                                  1. a person that is a successor to a person referred to in paragraph (a):
                                    1. a person that is a franchisee, or a transacting shareholder (within the meaning of the Co-operative Companies Act 1996), of a person referred to in paragraph (a), (b), or (c):
                                      1. a person that is an interconnected body corporate or associated person (within the meaning of section 47) of a person referred to in paragraph (a), (b), (c), or (d)

                                        exclusivity covenant includes, without limitation, a right of first refusal

                                          grocery product means goods in any of the following product categories: bread, dairy products, eggs or egg products, fruit, vegetables, meat, fish, rice, sugar, manufacturer-packaged food, and medicine other than prescription medicine

                                            retail grocery store means a place at which a material part of the business being carried on is the business of supplying 1 or more categories of grocery products to consumers (for example, a butchery, fishmonger, bakery, or pharmacy).

                                            1. A designated grocery retailer has an interest in a covenant—

                                            2. if the person is or was a party to the covenant; or
                                              1. if the person is or was a party to any contract, arrangement, or understanding that resulted in the giving of the covenant or to the inclusion of the covenant in a lease; or
                                                1. if the person required, or is deemed by section 28(6) to have required, the giving of the covenant; or
                                                  1. if the person gives effect to, carries out, or enforces the terms or provisions of the covenant; or
                                                    1. if the person takes any action described in section 28(5).

                                                      1. Subsection (1) does not limit any other provision of this Part.

                                                      2. If this section applies, the reference in section 61(6) to any lessening in competition that would result, or would be likely to result, includes any lessening that this section provides must be treated as resulting.

                                                      Notes
                                                      • Section 28A: inserted, on , by section 4 of the Commerce (Grocery Sector Covenants) Amendment Act 2022 (2022 No 35).