Franchising in New Zealand has grown dramatically in the last five years. The 2000 Survey of Franchising published in September 2000 has confirmed a 25% per year increase in the number of systems, outlets and those employed in them during the past 12 months, with over 300 systems operating in the franchising area. More than 41,000 people are working within franchising (the population of New Zealand is approximately 3.8 million) and 68% of operations originate in New Zealand.

In 1999 the (then) national government proposed an amendment to the Commerce Act 1986. However, the draft Commerce Amendment Bill 1999 contained some controversial provisions that would dramatically affect both licensing and franchising in New Zealand.

The Franchise Association of New Zealand made a detailed submission and asked to be heard in front of the Commerce Select Committee. The hearing was due to take place in October 1999 but was delayed until October 12 2000 due to the general election.

The committee heard an update of recent developments, including the European block exemption where the Franchise Association claimed that the proposed amendments were unacceptable.

Under these amendments it would have become illegal to divide up New Zealand and established territories. The bill was trying to make such conduct anti-competitive and therefore in breach of the Commerce Act 1986. The actual wording in the bill was as follows:

"A provision of a contract, arrangement, or understanding is deemed for the purposes of Section 27 to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition in a market if the provision has the purpose, or has or is likely to have the effect, of...

(c)dividing, distributing, allocating, or apportioning, or providing for the dividing, distributing , allocating, or apportioning, of a market for goods or services on any basis, including customers, suppliers, territory or time of sale; or

(d)limiting, or providing for the limiting, of the quantity of goods produced, processed, distributed or sold, or restricting, or providing for the restricting, of the number, volume or frequency of services offered."

After the formal presentation the chairman of the Commerce Select Committee announced that the committee had been persuaded by the Franchise Association's arguments and would ensure that franchising (and licensing and distributorships in the wider sense) would not be impeded by the Commerce Amendment Act 2000.

For further information on this topic please contact Stewart Germann at Stewart Germann Law Office by telephone (+64 9 308 9925) or by fax (+64 9 308 9922) or by e-mail ([email protected]).

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