Ministerial foreword

Hon Dr Duncan Webb, Minister of Commerce and Consumer Affairs

Price, place and product are 3 foundation stones of a competitive market. Restrictive land agreements seek to remove one of those foundation stones. One way in which to limit competition is to exclude other similar business from competing in the same place – people will only travel so far for a cheaper product, whether that is fuel to fill up the tank, a trolley load of groceries, or just a coffee.

Evidence so far suggests that big businesses have been locking out new market challengers by excluding them from using key locations. Examples might include petrol stations selling a site with a limitation (covenant) for any subsequent owner that it can’t be used as a petrol station. Another kind of limitation is a term in a lease (such as in a shopping mall) that says that no competing butchers, fruit and veg, or grocery stores are allowed.

Some restrictions on land use are fair. Examples include those used to protect neighbours from inappropriate activities, or to protect important natural or heritage aspects of the land.

However, it seems hard to justify a restriction on land use where its main objective is to stop other businesses competing. The effect of those restrictions is to give a stronger market position to incumbents – and in some cases, it might amount to an effective monopoly. The long-term effect of such arrangements might be not only to drive up prices, but also to limit innovation, variety and geographical availability of goods and services. That makes everyone worse off in the end.

We have already taken steps to make it illegal for supermarkets to create such restrictive land agreements (or to rely on ones which are already in place), but we want to know how widespread this issue is to determine what further steps to take.

We also want to understand when such agreements are justifiable and what, if any, limitations should be placed on such agreements – to make sure that any steps we take will be targeted and proportionate.

So, if you have experience with land agreements which have restricted business activities, we want to hear from you – so that we can make New Zealand a better place to do business and provide a more competitive environment for all New Zealanders.