Unconscionable conduct is one of a small number of Commerce Commission enforcement priorities, which signals where the Commission will direct its resources and its litigation fund.
It is also poorly understood, because the line between hard commercial bargaining — which is lawful and normal — and unconscionable conduct is a matter of degree.
What the prohibition covers
The Fair Trading Act prohibits conduct in trade that is unconscionable. It applies to business-to-business dealings as well as to consumers, which is what makes it relevant to supply relationships.
Whether conduct is unconscionable is assessed against factors including:
- Relative bargaining power between the parties.
- Whether terms were reasonably necessary to protect legitimate interests.
- Whether the affected party was able to understand the documents.
- Use of undue influence, pressure or unfair tactics.
- The extent to which the parties acted in good faith.
- Whether requirements were imposed that were not reasonably necessary.
- Whether the affected party was willing to negotiate and was given a genuine opportunity to.
No single factor decides it. The overall picture does, and the threshold is meaningfully higher than “one-sided” or “commercially tough”.
Where it arises in practice
The pattern is typically a substantial imbalance in power combined with conduct that exploits it:
- Take-it-or-leave-it supply terms imposed on much smaller counterparties with no opportunity to negotiate.
- Unilateral variation of terms mid-arrangement, particularly after the smaller party has invested in the relationship.
- Retrospective deductions or charges applied without agreement.
- Pressure to accept terms quickly without time to take advice.
- Disproportionate enforcement of contractual rights in circumstances where doing so is punitive rather than protective.
- Demanding contributions or rebates not provided for in the agreement.
Sectors where the dynamic is most visible: grocery and retail supply, franchising, construction subcontracting, and any arrangement where a small business is heavily dependent on one large counterparty.
The related unfair contract terms provisions
Separately, the Fair Trading Act allows terms in standard form small trade contracts to be declared unfair, with enforcement action available.
A term is vulnerable where it causes a significant imbalance, is not reasonably necessary to protect a legitimate interest, and would cause detriment if relied on.
Common candidates:
- Unilateral variation clauses.
- Automatic rollovers with narrow cancellation windows.
- Broad liability exclusions.
- Terms allowing one party to terminate at will while binding the other.
- Terms allowing one party to determine whether a breach has occurred.
Businesses using standard terms drafted years ago should have them reviewed against these provisions.
What larger businesses should do
- Give genuine opportunity to negotiate, and record that you did.
- Allow reasonable time to consider and take advice.
- Justify onerous terms by reference to a legitimate interest you could actually articulate.
- Do not vary retrospectively or impose charges outside the agreement.
- Train commercial staff. The conduct that creates exposure usually happens in a conversation or an email, not in the contract.
What smaller businesses should know
If you are on the receiving end of this conduct, it is potentially actionable and the Commerce Commission takes complaints.
Practical steps: keep the correspondence, record what was said in meetings, note the timeframes you were given, and get advice before signing something you were pressured into. Documentation of the process is what makes a complaint viable.
Note also that the Construction Contracts Act payment regime overrides contrary contractual arrangements in construction, which gives subcontractors a statutory position independent of what the contract says.
The broader reform context
Commerce Act amendments signalled for mid-2026 aim to strengthen the merger regime, address concentrated markets and predatory pricing, and streamline Commission processes. Concentrated markets are the underlying policy concern, and unconscionable conduct enforcement sits alongside that.
The Commerce Commission publishes guidance on unconscionable conduct, unfair contract terms and its enforcement priorities free at comcom.govt.nz.
General information only, not legal advice.
