One of the big reasons that the three New Zealand Gift Fairs are must-attend dates in many retailers’ diaries is the opportunity to pick up exclusive rights to sell sought after products. But, is this legal practice?
“This is called ‘exclusive dealing’,” says Alan Stuart, of Warkworth Barristers and Solicitors, Webster Malcolm & Kilpatrick. “It refers to the situation where a wholesaler or manufacturer sells to just one, or a restricted number of retailers, in an area."
“In general, there can be no objection to it and it’s seen with many products and services. You can’t buy Shell petrol at a BP station, a new Holden from a Ford dealer, or KFC from McDonalds, for example, because in each case the suppliers won’t supply their products to an outlet that sells competing goods.”
Alan notes, though, that there are cases where exclusive dealing is not lawful.
“If the refusal to supply is intended to, or has the effect of, substantially reducing competition in a market then it is illegal and can attract substantial penalties. The same is true if the grant of an exclusive licence, or a refusal to supply, is linked to the price the retailer charges for reselling the goods. This constitutes resale price maintenance and is prohibited in all circumstances.”
And so to the big question: How fair and legitimate are the exclusives that lucky retailers can pick up at the gift fairs?
“Assuming that the purpose for exclusivity is NOT price control, the first thing in deciding the answer to this is to define the market,” explains Alan.
“The gift trade market is not strongly defined geographically, or by particular products. Potential purchasers can and do travel reasonable distances to get what they want, and can and do select from a very wide variety of goods offered by many retailers. The inability of one store to supply a particular product does not substantially reduce competition for goods or gifts, indeed it may promote competition by encouraging a retailer to find a competing product to sell.
“This all means that the offer to exclusively supply (or, the other side of the coin, the refusal to supply) a particular product is not likely to be anti-competitive. It would be even less likely if the main market was tourist-oriented. This is because tourists travel, which means the geographic market is likely to be large – even New Zealand-wide – and if they can’t get something they want in one place they can try somewhere else.”
Reassuring advice – and a reminder that New Zealand Gift Fair exclusives can be good business.
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