Rich hangs up her lobbying pearls
AUCKLAND: Katherine Rich began raising concerns about supermarket power in the New Zealand grocery sector over a decade ago.
Back then she chose her words carefully and, metaphorically speaking, ‘‘with very much a whisper’’, she said.
Over the years her voice has both strengthened and joined a chorus of others. And last year this group’s objections to the country’s powerful duopoly grocers — Foodstuffs and Woolworths — reached a crescendo.
In testimony and submissions to the Commerce Commission, parties ranging from Consumer NZ to small grocers like startup Supie, dairy chain Night ’n Day and industry lobbies like the Food and Grocery Council (FGC) — where Mrs Rich holds the job of CEO — recounted their difficulties in the country’s $22 billion grocery market which is dominated by just two retail players.
In March, the final report of the commission’s market study on competition in grocery retailing provided Mrs Rich and her fellow travellers with considerable vindication.
Competition, the regulator concluded, is ‘‘not working well for consumers’’; ‘‘intensity of competition between the major grocery retailers is muted and does not reflect workable competition’’; ‘‘the profitability of the major grocery retailers appears higher than expected under workable competition’’; and ‘‘prices appear high by international standards’’.
The Government responded with a slew of reforms. Taken together, and in conjunction with recent amendments to both the Commerce Act and the Fair Trading Act, the change is ‘‘huge’’, Mrs Rich said.
A new supermarket watchdog, in the form of a Grocery Commissioner, will police, among other measures, major retailers’ wholesale supply to competitors; a code of conduct to mediate supermarket dealings with frequently smaller suppliers (FGC members); and new rules for pricing transparency and clarity for consumers.
The moment provides what Mrs Rich calls a ‘‘natural break’’ following a period of intense lobbying. And after some 13 years at the helm of the FGC, she will retire from the job next month.
Perhaps in tacit recognition of the battle win, she’s left her trademark string of pearls in the drawer on this September morning. Today she’s paired a more delicate single diamond pendant with a silver thistle brooch, also worn when she made her maiden speech in Parliament as a National MP in 1999.
Reviewing the changes, and the long road she’s trodden in pursuing them, Mrs Rich was optimistic that both New Zealand shoppers and supermarket suppliers would reap a fairer deal as a consequence.
She noted, with satisfaction, that the ComCom was already advertising five positions to bolster the new Grocery Commissioner (who would be appointed, after legislation passes, next year).
The jobs were consequential: chief adviser, project coordinator, senior project manager, senior analyst and implementation manager. All were in grocery regulation.
‘‘It’s clear there’s going to be a team around the new commissioner, it’s not going to be just one lonely little petunia in the onion patch . . . and I really don’t think people appreciate yet how transformative that’s going to be — having this group scrutinise supermarket dealings day in day out,’’ she said.
The Government has also left the door open to making further, more radical, change. Consultants are currently working to provide David Clark, Minister of Commerce and Consumer Affairs, with analysis to illuminate the risks and rewards of forcing a break up of the supermarkets — likely through forcing either the separation of banners and/or the divestment of stores.
Mrs Rich was equivocal about whether this step was warranted. She was pleased that the Government had promised to review the state of the industry annually (rather than every three years as the ComCom recommended).
‘‘Now isn’t the time to take your foot off the gas’’, she said.
On the other hand, she was not willing to actively push for the forced divestiture of private assets — it was a step that many of her members, private businesses themselves, considered a bridge too far.
‘‘We’ve now got a lot of regulatory change coming through, and at the end of the day we do need to let it work. The point is to allow another player to step in, or to grow up, and compete,’’ she said.
But despite what many said was the impracticability of the break up — the Government would be open to legal challenges and the outcome might do little to dent high grocery prices — the threat had appeared to transform the supermarkets’ approach to public relations.
In the past 12 months both Foodstuffs (New World, Pak’nSave and Four Square) and Woolworths (Countdown and Fresh Choice) had embraced plans to cancel their land and lease covenants, which helped prevent competition, and to pursue a code of conduct.
With a wide smile, Mrs Rich called it a damacene conversion and noted that she was simply pleased by the recent enthusiasm figures such as Chris Quin, CEO of Foodstuffs North Island, had found for reform.
‘‘We were asking and asking the supermarkets for a voluntary code of conduct. For years. The last time we broached the subject with Foodstuffs was in 2018 and we were knocked back pretty decisively,’’ she said.
It was a defeat which fuelled her determination to pursue mandatory change. Around that time she engaged competition law specialists Matthews Law, and the firm supplied the FGC with a shopping list of possible law changes to ‘‘address supermarket buyer power’’.
They included changes to broaden the test for abuse of market power and a prohibition against ‘‘unconscionable conduct’’, typically to give smaller players power beyond the terms of a contract. Both amendments have now passed into law.
The list also included a legal change to allow the Commerce Commission to undertake market studies — detailed research into a particular market where there are concerns that competition is weak or distorted.
Indeed, that ball was already rolling. Started under the
Nationalled coalition in 2016 and 2017, and passed into law by the newly minted Labourcoalition in 2018, the commission’s new powers were quickly put to use — first to consider the retail fuel market, and then the grocery sector.
The ComCom’s findings, and the Government’s response, remains contentious in some quarters. The supermarkets contend that the regulator has exaggerated their profitability. And marketoriented groups such as the New Zealand Initiative have welcomed changes such as the prohibition on anticompetitive land and lease covenants — and would like to see more action in the dismantling of restrictive planning and overseas investment rules.
However, they’ve rejected, as overregulation, such measures as the requirement for supermarkets to wholesale to competitors.
A contingent of Mrs Rich’s own FGC members — large suppliers who tend not to suffer from a power imbalance in their dealings with supermarkets — were also wary of the expanding ranks of officials and more regulation.
Mrs Rich acknowledged that it had not always been easy to promote the interests of such a disparate group. But it was unsurprising that, in the end, she had fought most fiercely in the corner of the smaller businesses, many of them food manufacturers, often familyowned.
Those who have watched her since her days in Parliament have been reminded of the stand she took in 2005 against thenNational Party leader Don Brash; back then she refused to toe the party line on welfare reforms, siding with unemployed mothers.
Ultimately, you have to follow what was in your heart and to know when it was time to move on, she said.
At the FGC, she is handing over to Raewyn Bleakey, who has considerable experience both in government and beyond, running industry associations. And this is not retirement.
Mrs Rich expected to start or join another venture — a business, perhaps — working to achieve regulatory change. But in the short term she would take a break, involving an online course or two, but the work would be done against the ever changing backdrop of Stewart Island’s Easy Harbour, where she owns a house.
She would read and bake and walk, trading her pearls for a raincoat and a stout pair of boots, at least for the time being. —
❛ Now isn’t the time to take your foot off the gas