‘Clear justification’ for grocery sector change
Commerce and Consumer Affairs Minister David Clark says New Zealanders will benefit from a much more competitive grocery sector as a result of market study findings unveiled by the Commerce Commission on Tuesday.
The commission released its final report into the supermarket sector, which stopped shy of recommending some of the more drastic changes that had been mooted at the draft stage.
It is recommending making more land available for new grocery stores by changing planning laws to free up sites, banning the use of restrictive land covenants and exclusivity clauses in leases that prevent retail grocery stores from being developed, and monitoring land banking by the major grocery retailers.
It also plans to ‘‘improve access to the wholesale supply of a wide range of groceries at competitive prices’’ by regulating to require the major grocery retailers ‘‘fairly consider’’ any requests they receive to supply competitors.
It wants a mandatory code of conduct and the commission plans to monitor ‘‘strategic conduct by the major grocery retailers’’, such as the use of ‘best price’ clauses and exclusive supply agreements.
But Countdown and Foodstuffs will not be required to wholesale groceries to their rivals and the commission has not announced any plan to require them to sell stores, as had been suggested as a possibility.
Clark said the report was clear that competition in the grocery sector was not working.
‘‘Consumers could get better prices, range and quality if action is taken,’’ he said,
‘‘We made a manifesto commitment in 2020 to address the rising cost of groceries and to make sure shoppers are paying a fair price at the checkout. It’s especially important as the economy recovers from the impact of Covid-19.’’
He said the Government would immediately progress its work to address the recommendations.
‘‘This includes exploring how a code of conduct between major retailers and suppliers could be developed and looking at the role a dedicated regulator for the grocery sector could play.
‘‘The commission’s findings indicate that restrictive covenants over land are a major barrier to supermarkets accessing new sites, so I want to ban these covenants being used to stop competition.
‘‘The report sets out a clear justification for change in the grocery market. The status quo will not deliver fairer prices for consumers and a better deal for producers and wholesalers, and I hope the sector will constructively engage in the changes that need to be made.
‘‘Given the importance of achieving healthy levels of competition in our retail grocery sector I have not ruled out some of the other options that the Commerce Commission tabled while developing its report, if consumer benefit is not achieved from the changes recommended in the report.
‘‘When New Zealand supermarkets are making more than double what the Commerce
Commission considers to be a normal rate of return on capital for grocery retailing, it’s clear there is a problem with competition that needs to be fixed.
‘‘New Zealanders are paying more at the checkout than most. Out of 38 OECD countries we’re the fifth highest in terms of grocery prices. This report makes a serious case for change when it comes to competition in the sector, so kiwis don’t have to pay so much for the basics,’’ Clark said.
Representatives of the fruit and vegetable industry welcomed the report.
HortNZ chief executive Nadine Tunley said measures such as a code of conduct, prohibition of unfair contracts and a disputes resolution scheme would ‘‘reverse the imbalance of power’’ that had been identified.
‘‘The improved relationship along with greater transparency should ensure that growers get a better return on their investment, so they will continue to invest in fruit and vegetable growing so New Zealanders can eat healthy, locally produced food.’’
Foodstuffs and Countdown said they were still reviewing the final report.
‘‘We’ve been actively engaged in the market study process over the past 16 months and have already committed to meaningful change to improve outcomes for our customers,’’ a Foodstuffs spokeswoman said.