Food industry groups have backed the Government’s supermarket shake-up, saying it will improve competitiveness and fairness in New Zealand’s grocery sector.
The Government announced it will establish a mandatory code of conduct between supermarkets and suppliers alongside an industry regulator in a raft of changes in response to the Commerce Commission’s market study of New Zealand supermarkets.
Horticulture New Zealand chief executive Nadine Tunley said their organisation supported any move to improve the performance and transparency of New Zealand’s supermarket sector.
“Consumers and fruit and vegetable growers need to know they are getting a fair deal from the supermarket sector, particularly when competition is limited due to the small size of the New Zealand market.
“Greater transparency and competition in the supermarket sector will improve the functioning of the wholesale fruit and vegetable market, which will increase consumer understanding of the very real relationship between supply and demand,” Tunley said.
The Government has accepted 12 of the report’s 14 recommendations and is taking stronger action on the other two.
Minister of Commerce and Consumer Affairs David Clark said the supermarket industry was not working.
“It’s not competitive and shoppers aren’t getting a fair deal. The duopoly needs to change, and we are preparing the necessary legislation to do that.”
Clark said the Government had rejected the commission’s recommendation for a three-year review timeframe because of the cost of living pressures facing New Zealanders.
“Our supermarkets know they’re in the spotlight, and we’ve recently seen some posturing around price rollbacks. However, it doesn’t fix the systemic problem at large – which is a lack of genuine competition in the sector.”
Clark called on the supermarkets to open up their wholesale arms to would-be competitors, at a fair price.
“Do this knowing the Government is determined to get a regulatory backstop finalised by the end of the year.
“If supermarkets do not strike good-faith wholesale deals with their competitors – our regulatory measures will make it happen for them. We are not afraid to unlock the stockroom door to ensure a competitive market.
“We are also looking at how to implement compulsory unit pricing on grocery products which will give shoppers the ability to better compare products. Plus, we’re getting ready to launch consultation on the code of conduct that retailers will have to adhere to.”
The Commerce Commission will act as an interim industry regulator until the Government has established an entity for this role.
“Once established, the ‘watchdog’ will help keep pressure on the grocery sector, by providing annual state-of-competition reviews to keep supermarkets honest, as opposed to the check-in after three years recommended by the commission. It will also facilitate a resolution scheme to mediate disputes between suppliers and retailers.”
The two recommendations not accepted by the Government relate to implementing a voluntary wholesale access regime and to a review of competition in three years.
Clark said he has spoken with both supermarket companies.
“They know what is expected from them and the length of time we are prepared to give them to change before regulation kicks in.
The changes will sit alongside legislation announced at the Budget to ban supermarkets from using restrictive covenants on land, and leases to block competition from setting up shop in certain suburbs and shopping centres. This Bill is currently with select committee.
New Zealand Food and Grocery Council chief executive Katherine Rich said the changes announced by Clark will make a difference to the competitiveness of New Zealand’s grocery market.
“Consumers, suppliers and other retailers will welcome these plans. The Government has recognised change needs to occur if there is to be genuine competition in the grocery market and an improvement in retailer behaviour,” Rich said.
“As we have said regularly, the wholesale market for groceries is broken, and competitive access to a full range of products is important to support healthy competition.”