A new Grocery Commissioner to ensure increased competition
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Auckland, August 24, 2022
The government has given the supermarket duopoly a year to reach a ‘substantial’ agreement with wholesale customers or be forced to sell at prices set by a regulator.
Prime Minister Jacinda Ardern said that the government’s work to increase competition in the sector is a key part of its responses to the rising cost of living.
“Limiting the supermarket options on offer for consumers severely restricts their ability to shop around for a better range of products and of course, a better price. The Grocery Commissioner will be able to take action and issue substantial fines where necessary. Alongside the retail stores, supermarkets have wholesale arms,” she said.
Ms Ardern called on the duopoly to open up the market to potential competitors at a fair price. “We have said that if this does not happen, a regulatory backstop will be triggered,” she said.
Groceries Commissioner
Commerce and Consumer Affairs Minister Dr David Clark confirmed that if wholesale customers were unable to secure agreements promised under a voluntary regime within a year, the Grocery Commissioner will be brought in to make recommendations.
He said that the two big operators, namely Countdown and Foodstuffs sell at set prices and terms based on those recommendations.
“We have decided to take stronger action than the Commerce Commission suggested. They said that any wholesale regime should be voluntary. We are not confident that will deliver the results consumers deserve,” he said.
Dr Clark said that the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms. However, if those prices are not up to the government’s expectations, the new Grocery Commissioner will be able to regulate fairer prices.
“Ultimately, if these interventions do not deliver a fair deal new regulations can be utilised to require the major retailers to provide wholesale supply at certain terms, including price and range,” Dr Clark said.
Three deadlines
The duopoly would be required to meet three deadlines within six months to avoid the mandatory regime, they must (1) set formalised rules, criteria and procedures or standard terms and conditions (2) have the necessary systems ready to provide access to groceries for wholesale customers (3) have in place within a year, substantial agreements with wholesale customers who have sought access through good-faith negotiations.
The Commerce Commission made a number of recommendations after investigating the supermarket sector. Its final report into the $22 billion sector in March 2022 said that competition in the industry was not working well for New Zealanders, with supermarkets making about $1 million a day in excess profits.
Commerce Commission’s findings
Commerce Commission Chair Anna Rawlings said that while there was a growing fringe of other competitors in the sector, they were unable to compete effectively with the big two on price, product range or store location.
The government confirmed in May 2022 that it had accepted all the 12 recommendations of the Commerce Commission and planned to go further concerning two of them.
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