Franchise New Zealand | Autumn 2026 | Year 35 Issue 01
46
In the previous issue of Franchise New Zealand, specialist competition law
barrister Anna Ryan of Canterbury Chambers explained how the Commerce
Act applies in a franchise setting. In this issue, Anna answers questions from
franchisors, franchisees, and advisors about price fixing.
Question 1
In smaller industries (whether franchising is prevalent or not), the usual
price for certain services can become quite well known. Everyone
knows the “standard rate”. In such cases, how does the Commerce
Commission distinguish between price fixing and ordinary market
knowledge?
Competitors often have a good sense of each other’s pricing. Prices may be
publicly advertised, such as petrol prices, or listed on websites, brochures,
or social media. Customers who shop around may also share what others
are charging. All of this is legitimate market intelligence. The Commerce
Commission has no issue with businesses knowing information that is
publicly available or obtained independently.
When a business becomes aware of competitors’ pricing through legitimate
means, it can, and can reasonably be expected to, take that information
into account when setting its own prices. It is entirely lawful for a business
to decide to match a competitor’s price, provided that decision is made
independently and not as part of any agreement or understanding with
others. Each business must make its own pricing decisions, whether that
means matching, undercutting, or charging more than its competitors.
Where the Commission draws the line
The Commission is focused on ensuring that pricing is not the result of
anticompetitive collusion.
Under the Commerce Act, price fixing occurs when competitors enter into an
arrangement or understanding, whether formal or informal, that has the purpose,
effect, or likely effect of fixing, controlling, or maintaining prices. This can include:
• agreeing not to discount
• agreeing to use the same pricing formula or structure
• agreeing to increase prices by the same amount or at the same time
• coordinating minimum prices or setting a common floor price
The arrangement does not need to be written down or formally documented.
A loose or unspoken understanding can still breach the Act if it reduces
uncertainty about how each competitor will price.
Why information sharing is so risky
Businesses should avoid sharing current or future pricing information with
competitors and should only share historic pricing information after obtaining
competition law advice. Exchanging sensitive information can:
• reduce uncertainty about how competitors will behave
• make it easier for competitors to align prices or avoid discounting
• contribute to an arrangement or understanding about future
pricing behaviour
Even without a formal agreement, repeated or structured exchanges of
sensitive pricing information can support a finding that competitors have
reached an arrangement or understanding that has the purpose, effect, or
likely effect of fixing, controlling, or maintaining prices. This is prohibited
under the Commerce Act.
Question 2
What should a franchisor do if they suspect price fixing is occurring
between franchisees? Can the franchisor be held liable?
If a franchisor suspects that franchisees may be engaging in price fixing,
the first step is to seek advice from an experienced competition lawyer.
Price fixing is one of the most serious breaches of the Commerce Act, and
specialist advice helps ensure the franchisor responds appropriately and
protects its own position.
Is the franchisor legally implicated?
A lawyer will begin by confirming that the suspected conduct is limited to
the franchisees and that the franchisor has not, even inadvertently, become
involved. This usually involves meeting with the franchisor to understand the
concerns, reviewing the franchise agreement and manuals, and examining
any relevant communications between the franchisor and franchisees.
Determining the right course of action
If the franchisor is not implicated, the next step is to agree on the franchisor’s
objectives and the most effective way to achieve them. A key priority will be
getting to a point, as quickly as is reasonably possible, where the franchisor
can be confident that franchisees are making their pricing decisions
independently and that no price‑fixing is occurring. Depending on the
circumstances, this may involve a more detailed investigation into franchisee
behaviour or a lighter‑touch approach focused on education and
resetting expectations.
The right approach will depend on the seriousness of the concerns, the
level of cooperation from franchisees, and the franchisor’s broader
commercial relationships.
Key legal considerations
Two considerations must remain front of mind:
1. Price fixing is extremely serious. It carries significant civil penalties and,
since 2021, criminal liability for individuals involved in cartel conduct.
2. A franchisor can be liable if it aids, abets, or is knowingly concerned in
price fixing. It is therefore essential that the franchisor takes all practicable
steps to ensure its network is complying with the law and that it is not seen
to be tolerating or facilitating unlawful conduct.
No obligation to report
A franchisor may choose to report its concerns to the Commerce
Commission, but it is not legally required to do so. There are legitimate
reasons why a franchisor might prefer to address the issue internally,
including the potential for reputational harm and the impact on relationships
with franchisees across the network.
Engaging with the franchisees
A constructive starting point may be for the franchisor and its lawyer to meet
separately with each franchisee involved. This allows the franchisor to outline
its concerns, hear the franchisee’s perspective, and ensure the franchisee
understands the seriousness of the allegations. A competition lawyer can also
explain what a Commerce Commission investigation would involve and the
potential consequences if price fixing is found.
Anna Ryan answers questions from
franchisors, franchisees and advisors
about how to avoid instances and
allegations of price fixing
AVOID
PRICE
FIXING
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