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Grocery market study recommends changes to improve competition and benefit consumers
Published 08 Mar 2022
The Commerce Commission’s final report from its study into the retail grocery sector has recommended a suite of changes to increase competition and help improve the price, quality and range of groceries and services available to New Zealanders.
In November 2020, the Government asked the Commission to take an independent look at the factors affecting competition in the $22 billion a year industry. Commission Chair Anna Rawlings says the final report has concluded that competition in the grocery sector is not working well for New Zealand consumers. “We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges,” says Ms Rawlings. “While there is an increasingly diverse fringe of other competitors in the sector, they are unable to compete effectively with Woolworths NZ and Foodstuffs on price, product range, and store location to offer the convenience of one-stop shopping for the many different kinds of shopping missions that consumers undertake.” The Commission has also identified that the nature of retail pricing and promotional strategies, and the major grocery retailers’ relationships with suppliers, indicate that competition is not working as well as it could. In addition, it has highlighted that New Zealand’s retail grocery prices appear comparatively high by international standards, the profitability of major retailers also appears high, and while consumers benefit from a range of innovations, there is scope for more. The Commission has recommended a suite of changes and new regulatory measures to help improve the conditions for competition in the sector. It has also proposed a dispute resolution scheme and an industry regulator responsible for monitoring and oversight to help ensure those changes have the desired effect. “The best way to improve competition in the retail grocery sector is through measures that will make it easier for independent grocery retailers to set up and expand,” says Ms Rawlings. “We found that the biggest challenges facing competitors are a lack of suitable sites for store development and difficulties in obtaining competitively priced wholesale supply of a wide range of groceries.” To address these challenges, the Commission has recommended:
- 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
- Improving access to the wholesale supply of a wide range of groceries at competitive prices, by regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors, and requiring the criteria for obtaining supply and terms and conditions of supply to be transparent
- Monitoring strategic conduct by the major grocery retailers, such as the use of ‘best price’ clauses and exclusive supply agreements.
The Commission has also identified that competition is not working well for many of the businesses that supply groceries to the major grocery retailers. “Many grocery suppliers fear having their products removed from store shelves if they do not agree to accept some costs, risks, and contractual uncertainty. This can reduce the ability and incentive for suppliers to invest and innovate, reducing choice for consumers,” says Ms Rawlings. The Commission has recommended:
- Introducing a mandatory code of conduct for grocery supply relationships to improve transparency and ban unfair conduct
- Strengthening the existing law prohibiting the use of unfair terms in standard form contracts
- Considering whether to allow collective bargaining by some suppliers.
Recommendations to help consumers make more informed purchasing decisions, and stimulate competition between retailers, include:
- Requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand
- Requiring grocery retailers to display unit pricing in a consistent format.
“The market study has brought an increased focus on the sector and the major grocery retailers have publicly committed to address some of the practices covered by our recommendations. “Nevertheless, the Commission has recommended formal regulatory requirements, monitoring and oversight by a grocery regulator, and a dispute resolution scheme to resolve wholesale and supplier disputes. These regulatory measures will help deliver the changes to competition that we have identified are needed,” says Ms Rawlings. “In addition, we have recommended a review of competition three years following the implementation of any changes to evaluate their effectiveness.” The final report and recommendations are now with the Government to review and consider. An executive summary, the full draft report and infographics on the findings and recommendations are available on the Commission’s website . ENDS
In November 2020, the Government asked the Commission to study the factors affecting competition in the retail grocery market. The full terms of reference for this study can be found here .
- The market study was completed in 15 months after a short extension in recognition of the ongoing impact of lockdowns on grocery retailers and the need for the Commission to move its consultation conference online.
- The techniques the Commission used to gather information to inform the study included an online consumer survey, a business survey, and economic research into consumer preferences.
- The Commission published its draft report in July 2021, which contained draft findings and options for recommendations.
- The draft report resulted in a high number of written submissions, and views were also canvassed through an online conference and a range of interviews with interested parties.
What is a market study? A market study examines whether competition is working well and, if not, what can be done to improve it. It looks at the structure, conditions and performance of a sector rather than whether there has been any breach of the laws that the Commission enforces. If information collected during a market study suggests that it is warranted, the Commission may separately consider what further action may be required utilising our compliance or enforcement functions and powers. What can be the outcomes of a market study? Outcomes of our work may range from a ‘clean bill of health’ for the sector, to recommendations for changes to enhance market performance. The Commission’s recommendations are non-binding, but the Government must respond to any recommendations within a reasonable period.
Commerce Commissions market study into the grocery sector
The Commerce Commission (Commission) released its findings of its market study into New Zealand’s grocery sector on 8 March 2022 in its 609-page long “Market study into the grocery sector final report” ( Report ). In the Executive Summary , the Commission concluded that competition in the industry is “not working well for consumers” and has recommended changes, including regulatory measures to help improve the sector’s current state. The findings and recommendations of this Report, if implemented, will likely have impacts on all stakeholders of the groceries market. The Government recently published its response to the supermarket study on 30 May 2022, accepting 12 of the Commission’s 14 recommendations. In this article, we focus on the potential impacts of the Report from a consumer protection perspective.
The overarching aim of the Report is to promote competition in markets for the long-term benefit of consumers within New Zealand . It intends to inform the public, industry and the Government about competition in the sector and how it operates. Gaining an understanding of the commercial relationships between market participants is a key aspect to identifying potential competition problems in the sector.
The Commission stressed that the best options for improving competition are those that enable an increase in the number of retailers directly competing against the two major retailers (i.e., Foodstuffs and Woolworths NZ) to offer a convenient one-stop shopping option, and recommended, among other things that:
- imbalances in bargaining power between the major grocery retailers and many of their suppliers should be addressed by strengthening the Fair Trading Act’s business-to-business unfair contract terms provisions; and
- retailers should help consumers make more informed purchasing decisions and competition should be enhanced at the retail level, by introducing mandatory unit pricing, as well as asking the major retailers to ensure that their pricing and promotional practices, and the terms and conditions relating to their loyalty programmes, are simple and easy to understand.
In section 1.9, the Commission also noted that it may separately investigate conduct which it considers could breach the Fair Trading Act 1986 (FTA).
In November 2020, the Government requested the Commission to conduct a study and prepare a report on whether competition in the grocery sector is working well, and if not, what changes could be made to improve it. This request was seen as being in the public interest, as the supermarket industry is of strategic importance to the New Zealand economy with the average Kiwi spending roughly 17 percent of its weekly expenses on food . The high level of concentration in the market, the potential competition concerns and the high prices for groceries were cited by the Minister, the Hon Dr David Clark, as reasons for asking the Commission to undertake the study .
In section 3.19, The Commission measured between 2015 and 2019 to exclude the ‘pandemic effect’ from its report , and focused on market composition and competitiveness. In section 3.21, data availability restricted the potential measures for the study, meaning the Report did not have the same range as used in the retail fuel market study.
The Report found that New Zealand’s grocery market is dominated by Foodstuffs and Woolworths which effectively operate as a duopoly. In the last decade, there has been no large-scale retail grocers with comparable offerings to Pak’nSAVE, Countdown or New World. The two retailers have a significant combined market share of the total consumer spend on grocery products across different types of shopping missions. Some estimates of market share suggest the retailers combined share is more than 90% for consumers’ main shop, and more than 80% for top-up shops. The profitability of major grocery retailers appears to be high, with New Zealand grocery prices also appearing high by international standards.
The Commission describes the competition as “muted”, despite a diverse fringe of other retailers whose impact is limited due to their inability to compete effectively. Potential new entrants to the retail grocery market face substantial barriers such as lack of suitable land sites to develop stores, which is significant in New Zealand given the country’s size and population profile. The availability of land is also impacted by major retailers placing restrictive covenants on land to prevent rivals from developing stores. Further, planning laws and implementation by local authorities creates uncertainty as to whether positive effects of trade competition can be considered in the planning process.
Consumers face complex pricing strategies, promotions and customer loyalty programmes which impact their decision-making, the Report has found. The major retailers use a variety of promotional mechanisms, making it difficult for an every-day consumer to make informed decisions. As a result, consumers are less likely to shop between products and retailers, impacting competition.
The imbalance of power in the retailer-supplier relationship is another key factor indicating competition is not working as well as it could. As many suppliers are reliant on both Foodstuffs and Woolworths, the two retailers can transfer certain costs, risk, and uncertainty onto suppliers. The suppliers face the risk of their products being taken off store shelves if they do not agree to the retailer terms. This reduces the incentive to invest and innovate, which in turn, impacts consumers as it reduces choice.
The Commission has received 701 complaints about grocery retailers for the fifteen-month period from 1 November 2020 to 31 January 2022, making up 7.9% of all FTA related complaints it received over the same period. An increased number of these complaints related to potentially misleading promotional pricing practices, pricing inaccuracies, unfair standard form contract terms and conditions f loyalty programmes, and privacy principles relating to data collection from consumers and consumer groups during its study. The Commission considered these FTA-related issues to the extent that they directly relate to whether competition in the grocery sector is working effectively, and analysed pricing practices over time to the extent they relate to competition.
While the Commission did not draw any conclusions as to whether these practices amount to breaches of the FTA, it has summarised these complaints in the Report, noting that the Commission has considered what further action may be required in relation to the major grocery retailers’ pricing practices. It is likely that the Commission will engage with the retailers further about these concerns.
Promotions and loyalty programs are valuable to competition, building reliability and helping consumers to make informed decisions. The major grocery retailers use a variety of pricing strategies which can make it hard for a consumer to shop around effectively. Consumers are susceptible to being confused when it comes to combinations of promotional techniques and loyalty programmes. Pricing and promotional practices can be regarded as misleading and deceptive conduct as per the FTA .
The Commission has been involved in previous price discrepancy issues, exampled by the PAK’nSAVE Mangere case. The price discrepancies were identified by mystery shoppers at the conduct of the Com-mission. Despite taking significant steps to remedy the problem, PAK’nSAVE Mangere was fined $78,000 as the “immediate failure to act was inexcusable” .
It is crucial to not mislead consumers when marketing goods and services. Retail pricing promotions are a major feature for grocery retailers and make up a large aspect of competition. Accordingly, the Commission recommends the major grocery retailers ensure their pricing and promotional practices are simple and easily understood.
Unfair contract terms regime
Through the changes introduced to the FTA by the Fair Trading Amendment Act 2021, from 16 August 2022, the FTA will prohibit:
- including an unfair contract term in a standard form small trade contract (a contract in trade with an annual value of less than $250,000), unless the term is included in a way that complies with the terms (if any) of the decision of the court; or
- apply, enforce, or rely on the unfair contract term in a standard form contract.
Currently, for a term in a standard form small trade contract to be deemed an unfair contract term, the Commission must apply to the court for a declaration that the term is unfair, and the court must rule as such.
Private parties are not able to apply to have such term declared to be unfair – although they can make a complaint to the Commission requesting that the Commission make a court application.
The Commission recommends in the Report that the newly introduced business-to-business unfair contract terms regime should be strengthened by:
- allowing private parties to apply for a declaration by the court;
- extending the prohibition to the inclusion of terms that meet the definition of being unfair, rather than only terms that have previously been declared to be unfair; and
- raising the transaction value cap for small trade contracts.
The Commission acknowledged the existence of clauses in supply agreements which may hinder the ability of suppliers to supply to other parties, such as best price clauses. Exclusive supply arrangements in some circumstances can be pro-competitive as they can enhance efficiency.
The Commission noted that it has not drawn any conclusions as to whether the privacy issues raised by the consumers and consumer advocacy groups are potential matters of interest to the Office of the Privacy Commissioner under the Privacy Act 2020. However, it highlighted not all consumers with certain data collection or privacy preferences are able to make informed decisions that reflect such preferences . For example, in its submissions to the draft Report, Foodstuffs communicated its intent with the Commission to ensure that its customers are aware that they are authorizing Foodstuffs to link their payment cards with their loyalty accounts by signing up to a Clubcard membership.
The Commission also raised concerns about the major grocery retailers’ privacy policies, noting that these retailers sell consumer insights data derived from loyalty programmes to third parties, and the policies lack clarity about who might be provided with consumer data and on what basis. The major grocery retailers lessen the consumers’ ability to accurately assess the value of the loyalty programmes by making it hard for consumers to understand how their data will be used. The Commission notes that this can reduce competition among loyalty programme operators.
Overseas Jurisdictions
In Australia, the Food and Grocery Industry Code of Conduct aims to level the playing field for food and grocery suppliers in their transactions with major supermarkets. The code utilises principles relating to the trading relationships between retailers and suppliers, providing greater certainty for the industry. The Australian Competition and Consumer Commission has conducted two rounds of compliance checks since the Grocery Code was introduced. These checks have confirmed some improvement, which is hopeful for the New Zealand industry if a similar code is introduced.
The unconscionable conduct prohibition like the FTA has been used in Australia with some success to deter unconscionable conduct by retailers against suppliers . This is encouraging for New Zealand competition if a similar path is followed.
Key Recommendations
The Commission recommended a variety of changes to enhance competition and consequently improve the price, quality, and range of groceries available to consumers.
The key recommendations are outlined below:
1. Improve conditions for entry and expansion by:
- freeing up land for supermarket development under planning law;
- prohibiting the use of restrictive covenants on land and exclusivity covenants in leases and
- requiring major retailers to consider requests for wholesale supply in good faith.
2. Improve competition for acquisition of groceries by:
- introducing a mandatory grocery code of conduct;
- considering statutory authorisation or exception for collective bargaining by suppliers;
- amend the FTA to strengthen the business-to-business unfair contract terms regime; and
- considering whether to allow collective bargaining by suppliers.
3. Improve ability of consumers to make informed decisions by:
- ensuring pricing and promotional practices are consistent;
- mandating the consistent display of unit pricing;
- enhancing transparency of data collection relating to loyalty programs; and
- encouraging major retailers to cooperate with price comparison services.
4. Introduce a grocery sector industry regulator to monitor and oversee the industry by providing a dispute resolution scheme to resolve any potential supplier and wholesale supply disputes.
The Commission also noted further review should be undertaken in three years to assess the impact of the recommendations if implemented.
Government Response to Market Study
The Government has recently accepted 12 of 14 Commission recommendations from the Report, publishing its response on 30 May 2022. The two recommendations not accepted relate to implementing a voluntary wholesale access regime, and a review of competition in three years.
The Government has, and over the coming months, plans to progress on reform including:
1. Improving the conditions for entry and expansion by grocery retailers, to introduce more competitive pressure into the market:
- Improve access to sites through planning law reform with the Ministry of Environment;
- The Commerce (Grocery Sector Covenants) Amendment Bill which amends the Commerce Act 1986, prohibiting restrictive and exclusive covenants over land and leases and making existing exclusive covenants unenforceable has received royal assent on 29 June 2022, and became law;
- New powers are given to the Commerce Commission allowing it to require supermarkets to hand over information regarding contracts, arrangements and land covenants which make it difficult for. competing retailers to set up shop;
- Implementing a monitored wholesale access regime and develop an additional mandatory wholesale grocery access regime to provide a regulatory backstop;
- Reviewing potential barriers to competition in other Acts;
- The Minister of Justice has signaled an intention to commence a review on the Sale and Supply of Alcohol Act 2012, which will involve considering the impacts of this Act on retail grocery competition.
2. Improving competition for the acquisition and supply of groceries;
- Consultation on a mandatory code of conduct between major grocery retailers and suppliers underway ;
- Implementing an exception from relevant Commerce Act provisions to allow grocery suppliers to collectively bargain;
- Changing the FTA unfair contract terms regime to allow private action in respect of unfair contract terms and raise the transaction value cap for grocery supply contracts.
3. Improving the ability of consumers to make informed purchasing decisions;
- Opening consultation on implementing mandatory unit pricing on grocery products.
4. Introducing a monitoring and oversight regime;
- Introducing a retail grocery regulator, which monitors strategic conduct that affects the conditions of entry and expansion;
- Establishing a dispute resolution scheme to deal with supplier-retailer disputes.
- The Minister of Commerce and Consumer Affairs Hon. Dr David Clark has recently announced the establishment of new industry watchdog: the Grocery Commissioner (‘Commissioner’). The Commissioner is expected to hold the sector to account and ramp up competition by providing annual state-of-competition reviews. The role is to be part of the Commerce Commission. The Commissioner is expected to be appointed before mid-2023. The Commissioner will have the ability to issue warnings, put fines in place for breaches of the code of conduct and go to court to seek that contracts be overruled.
5. Further matters;
- Working on the Grocery Industry Competition Bill to introduce regulatory changes;
- Undertaking work to examine potential steps to improve competition, such as requiring major grocery retailers to divest some of their stores or retail banners.
These updates are expected to be implemented by early 2023. The consultation and information on having your say on mandatory unit pricing for grocery products is available on MBIE’s website . For the full Market study into the retail grocery sector final report click here .
What do these mean to you?
New Zealanders currently pay the fifth highest in terms of grocery prices out of 35 OECD countries that submitted expenditure statistics for 2019, and are currently facing a cost of living crisis. The Commission believes, among other things, that Kiwis will benefit from at least one more large-scale rival in the retail grocery industry.
It will be interesting to see if the Commission’s recommendations will be adopted by the Government, in what way, and how they will affect consumers and businesses alike.
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Commerce commission final supermarket report - competition 'muted'; what's needed for lower prices.
Hamish Rutherford
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Chairwoman Anna Rawlings reveals the findings and recommendations from the Commerce Commission's market study into supermarkets. Video / Commerce Commission
The report's key recommendations: *Addressing imbalances in bargaining power between the major grocery retailers and many of their suppliers by introducing a mandatory grocery code of conduct; * Freeing up land for supermarket development, through changes to planning laws and prohibiting the use of restrictive covenants on land and exclusivity covenants in leases; *The major grocery retailers Woolworths and Foodstuffs offering wholesale supply to other grocery retailers on a voluntary basis, subject to some limited regulatory measures; *Helping consumers make more informed purchasing decisions and enhancing competition at the retail level by introducing mandatory unit pricing
The Commerce Commission has concluded competition is "not working well" in the supermarket sector, recommending a mandatory code of conduct for suppliers.
However, the competition watchdog has stopped short of requiring major structural change in the $22 billion sector.
This morning, the commission released its final report from its market study into supermarkets.
Chair Anna Rawlings said the two major groups, Foodstuffs and Woolworths, operated effectively as a duopoly with a fringe of smaller rivals.
"We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges," Rawlings said.
"While there is an increasingly diverse fringe of other competitors in the sector, they are unable to compete effectively with Woolworths NZ and Foodstuffs on price, product range, and store location to offer the convenience of one-stop shopping for the many different kinds of shopping missions that consumers undertake."
The two companies, which have a combined market share of about 80 per cent, largely only considered each other when setting prices.
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While Rawlings said the Commerce Commission found that profitability in the sector was higher than in many other countries, it had seen evidence late in the study process which meant it now believed the sector was not as profitable as it believed in its interim report in July 2021.
In July, Rawlings said the interim conclusion of the commission was that the problem in the grocery sector was structural. Today's release stopped short of recommending that the sector be forced to create an independent wholesale operator.
She said such a body was unlikely to be sustainable in the long term.
The commission found that the nature of retail pricing and promotional strategies, and the major grocery retailers' relationships with suppliers, indicated "that competition is not working as well as it could".
"In addition, it has highlighted that New Zealand's retail grocery prices appear comparatively high by international standards, the profitability of major retailers also appears high, and while consumers benefit from a range of innovations, there is scope for more.
"The best way to improve competition in the retail grocery sector is through measures that will make it easier for independent grocery retailers to set up and expand," Rawlings said.
"We found that the biggest challenges facing competitors are a lack of suitable sites for store development and difficulties in obtaining competitively priced wholesale supply of a wide range of groceries."
/cloudfront-ap-southeast-2.images.arcpublishing.com/nzme/HDEOARMQUNTSASHPKCQIATSEYQ.jpg "commerce commission supermarket report")
The report recommended changes to make 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.
Rawlings also recommended a dedicated supermarket regulator to go alongside a mandatory code of conduct to monitor relationships with suppliers.
"Many grocery suppliers fear having their products removed from store shelves if they do not agree to accept some costs, risks, and contractual uncertainty. This can reduce the ability and incentive for suppliers to invest and innovate, reducing choice for consumers," Rawlings said.
The commission recommended introducing a mandatory code of conduct for grocery supply relationships to improve transparency and ban unfair conduct, strengthening the existing law prohibiting the use of unfair terms in standard form contracts and considering whether to allow collective bargaining by some suppliers.
Recommendations to help consumers make more informed purchasing decisions, and stimulate competition between retailers, include requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand.
It also recommended grocery retailers display unit pricing in a consistent format.
"The market study has brought an increased focus on the sector and the major grocery retailers have publicly committed to address some of the practices covered by our recommendations.
"Nevertheless, the commission has recommended formal regulatory requirements, monitoring and oversight by a grocery regulator, and a dispute resolution scheme to resolve wholesale and supplier disputes. These regulatory measures will help deliver the changes to competition that we have identified are needed," Rawlings said.
"In addition, we have recommended a review of competition three years following the implementation of any changes to evaluate their effectiveness."
/cloudfront-ap-southeast-2.images.arcpublishing.com/nzme/M55U5XXLHRMXWSI7QMTRXG5QY4.jpg "commerce commission supermarket report")
Rawlings said recommendations were appropriate to respond to current market conditions.
The findings between the interim and final report were unchanged in that competition was not working well in the sector.
In July the commission said the market conditions were such that they did not believe a major third player would enter the market.
Today it said it believed that the recommendations, particularly around making land available, would increase the odds of a third player arriving.
Commissioner Dr John Small said the changes could make as many as 90 sites available that were not available before.
Forcing the major players to divest sites would be unprecedented, Rawlings said, and could lead to a loss of efficiency in the sector.
She said returns on investment in the sector were "higher than we would expect" but the commission had revised downwards estimated of profitability.
Previously the commission had said it believed that the return on capital could be in excess of 20 per cent in the sector, but Small said the view was that it was around 13 per cent.
Commerce and Consumer Affairs Minister David Clark says the Government will "immediately progress work to address the Commission's findings".
"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."
He said the report - the second of three market studies commissioned - is clear: "competition in the retail grocery sector is not working. Consumers could get better prices, range and quality if action is taken".
"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."
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The Commerce Commission has recommended a series of tweaks to the supermarket sector but stopped short of some of the tough measures it contemplated
The Commerce Commission has recommended a series of tweaks to the operation of the supermarket sector, but in the final report of its inquiry into the sector has stopped well short of some of the tough measures it earlier contemplated .
Some of the tough measures that had been mooted included making market participants structurally separate their wholesale and retail businesses, or even being forced to divest some of their brands.
Instead, in the final report, much emphasis has been placed on things such as easy availability of land for development of new supermarkets.
The commission is recommending that both a grocery sector regulator and a dispute resolution scheme be established.
"A sector-specific regulator could have responsibility for general oversight of the retail grocery sector. This could include monitoring and reporting on its performance, both publicly and to government," the commission says.
The commission is proposing another review after three years:
"If competition is still not working as well as it could after three years, the review could consider whether other initiatives are required."
On improving the prospect of competition through new players in the market, the commission says this:
"We consider that the best way to improve competition in the retail grocery sector is through measures that are likely to improve the conditions for entry and expansion. Improving the conditions for entry and expansion is likely to be particularly beneficial for consumers where this enables a greater range of grocery retailers to offer a convenient one-stop shopping option.
"We consider that the New Zealand market could sustainably accommodate at least one more large‑scale rival, and that reducing current constraints on entry and expansion would help to facilitate this.
"In the long term, actual entry or expansion is likely to be the greatest driver of competition. There are two main areas where we consider changes would be desirable to help facilitate an increase in the number of grocery retailers that compete effectively with the major grocery retailers:
→ freeing up sites for retail grocery stores; and
→ improving access to groceries for resale."
The commission said it considered other options such as a regulated wholesale access regime and vertical separation of the major grocery retailers (which would require their wholesale businesses to be run separately from their retail businesses).
"However, we do not recommend these options because:
→ introducing a regulated wholesale access regime for groceries would be very complex due to the wide range of products and dynamic nature of the sector; and
→ there are significant efficiencies associated with integrated retail and wholesale grocery operations, and there would be a range of practical challenges and transaction costs associated with separation."
Therefore it was recommending that the major grocery retailers "be given the opportunity" to negotiate commercial wholesale supply arrangements with other retailers, with regulatory oversight.
"The major grocery retailers have publicly stated that they are open to, or are exploring, the possibility of negotiating commercial wholesale supply in certain circumstances."
The executive summary of the final report is here.
The full report (warning, it's 609 pages!) is here.
This is the media release from the commission :
The Commerce Commission’s final report from its study into the retail grocery sector has recommended a suite of changes to increase competition and help improve the price, quality and range of groceries and services available to New Zealanders. In November 2020, the Government asked the Commission to take an independent look at the factors affecting competition in the $22 billion a year industry. Commission Chair Anna Rawlings says the final report has concluded that competition in the grocery sector is not working well for New Zealand consumers. “We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges,” says Ms Rawlings. “While there is an increasingly diverse fringe of other competitors in the sector, they are unable to compete effectively with Woolworths NZ and Foodstuffs on price, product range, and store location to offer the convenience of one-stop shopping for the many different kinds of shopping missions that consumers undertake.” The Commission has also identified that the nature of retail pricing and promotional strategies, and the major grocery retailers’ relationships with suppliers, indicate that competition is not working as well as it could. In addition, it has highlighted that New Zealand’s retail grocery prices appear comparatively high by international standards, the profitability of major retailers also appears high, and while consumers benefit from a range of innovations, there is scope for more. The Commission has recommended a suite of changes and new regulatory measures to help improve the conditions for competition in the sector. It has also proposed a dispute resolution scheme and an industry regulator responsible for monitoring and oversight to help ensure those changes have the desired effect. “The best way to improve competition in the retail grocery sector is through measures that will make it easier for independent grocery retailers to set up and expand,” says Ms Rawlings. “We found that the biggest challenges facing competitors are a lack of suitable sites for store development and difficulties in obtaining competitively priced wholesale supply of a wide range of groceries.” To address these challenges, the Commission has recommended: 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 Improving access to the wholesale supply of a wide range of groceries at competitive prices, by regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors, and requiring the criteria for obtaining supply and terms and conditions of supply to be transparent Monitoring strategic conduct by the major grocery retailers, such as the use of ‘best price’ clauses and exclusive supply agreements. The Commission has also identified that competition is not working well for many of the businesses that supply groceries to the major grocery retailers. “Many grocery suppliers fear having their products removed from store shelves if they do not agree to accept some costs, risks, and contractual uncertainty. This can reduce the ability and incentive for suppliers to invest and innovate, reducing choice for consumers,” says Ms Rawlings. The Commission has recommended: Introducing a mandatory code of conduct for grocery supply relationships to improve transparency and ban unfair conduct Strengthening the existing law prohibiting the use of unfair terms in standard form contracts Considering whether to allow collective bargaining by some suppliers. Recommendations to help consumers make more informed purchasing decisions, and stimulate competition between retailers, include: Requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand Requiring grocery retailers to display unit pricing in a consistent format. “The market study has brought an increased focus on the sector and the major grocery retailers have publicly committed to address some of the practices covered by our recommendations. “Nevertheless, the Commission has recommended formal regulatory requirements, monitoring and oversight by a grocery regulator, and a dispute resolution scheme to resolve wholesale and supplier disputes. These regulatory measures will help deliver the changes to competition that we have identified are needed,” says Ms Rawlings. “In addition, we have recommended a review of competition three years following the implementation of any changes to evaluate their effectiveness.” The final report and recommendations are now with the Government to review and consider. An executive summary, the full draft report and infographics on the findings and recommendations are available on the Commission’s website .
Commerce and Consumer Affairs Minister David Clark issued this statement:
New Zealanders will soon benefit from a much more competitive grocery sector as a result of market study findings unveiled by the Commerce Commission today. “The report is clear: competition in the retail grocery sector is not working. Consumers could get better prices, range and quality if action is taken,” Commerce and Consumer Affairs Minister David Clark 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. “This is the second of three market studies commissioned, to help Government continue to deliver on our promise to ensure hard-working kiwis are getting a fair deal for the things they buy and consume. “I know there is a desire to see us act swiftly on this too, and I want New Zealanders to know this will be the case. From today, we will immediately progress work to address the Commission’s 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,” David Clark said.
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57 Comments
What a sad joke. Completely useless.
To be fair I think they have addressed the 2 biggest issues. Best to try the simple approach first than the complete overhaul approach don't you think?
Just like the RBNZ, ComCom seem to work for the very industries they're supposed to regulate.
I wonder how long it'll be before we see a Woolworth's executive land a nice cushy job on the board there, just like Westpac's golden girl Karen Silk did at the Reserve Bank recently.
Groceries should actually be MORE expensive and I expect this will be the case going forward.
Supermarkets are a poor scapegoat for bad economic management.
Consider, consider, monitor, review.
This just sounds like a workstream for themselves, not the first step in wide-ranging reforms that the investigations keep being heralded as when they are first announced.
I agree, This review is an insult to the average hard working Kiwi. Utterly pathetic.
File this report away next to the one on Petrol pricing. What is next guy's? How about an investigation into land pricing.
One can’t help but think that the recommendations in the report were predetermined.
This investigation was a waste of public money and resources.
In the immortal words of Scarlett O’Hara. “Fiddle Dee Dee.” For more emphasis add “Tweak.”
I think I can now comfortably predict the outcome of the building supplies investigation.
The old boys club having a few glasses of whisky in some upmarket bar and a good laugh?
More along the lines of monitor, review, code of conduct for contractor supply, something something. Two years, a few hundred grand in the bank, five weeks of annual leave and all the WFH you can eat.
You remind me of Ian Botham’s remark about the then English cricket selectors, something like - hard to get anything right when you are looking through the bottom of a glass of gin, the lemon slice tends to get in the way.
Old boys club? It's International Woman's Day for heavens sake.
This one is more Prosecco with the BFFs, but still in some upmarket bar.
You mean you could not until now ??
No surprise. This government is all talk. No action.
Put in a commission, take months and spend millions to come out with a report which will keep the status quo with just a new cover on top.
This is pathetic, if we don't change, we do not make progress.
Much like this government, I suspect ComCom lacks the expertise within its ranks to even understand the complexities of supply chains, discounting regimes and pricing models.
Edit: as per the scope of this study in the report, it wasn't designed to look into those operations of supermarkets, just plain profitability analysis across geographic locations and broad product ranges from a competition economics perspective.
It is odd that over the last decades we have had both a Commerce Commission and the growth of duopoly conditions in building, supermarkets, and insurance. Surely we should have one or the other.
We've two major parties that will continue to talk the talk on duopolies, productivity, economic policy etc. but continue to do nothing of consequence.
So identical to the petrol inquiry the commerce commission has pulled out its feather and is whipping the industry back into line.
Cant wait to see the inquiry into the building industry.
How much is this costing us all - would it be better spent on something useful. Is the government capable of delivering anything meaningful.
Don't worry though, National will fix it! They will definitely stop their friends, who happen to be the owners of the petrol companies/supermarkets/hardware suppliers from screwing us more with exorbitant prices.
At this rate I'll take an off-handed 'Look would you stop taking the piss' on the back nine of the Remuera Golf Course with some party donors over wasting money on make-work schemes for Wellington paper-pushers. We know for sure that one doesn't work. Who knows, the other one might?
Have you ever considered buying a bridge? I might know of one going for a good price.
Will just accelerate the exodus to Oz and something meaningful will only happen once we reach breaking point. In the meantime Labour will actively push through its other changes under the radar. This was just a cover and a sop.
"While consumers benefit from a range of innovations there is scope for more" what the hell does that mean?
The exports of Libya are numerous in amount. One thing they export is corn, or as the Indians call it, "maize". Another famous Indian was "Crazy Horse". In conclusion, Libya is a land of contrast. Thank you.
That's disappointing, a lost opportunity to make food retail more competitive at a time when households are really feeling the pinch of runaway inflation.
There is foul play in the sector but quite a bit of the profiteering is to do with poor consumer awareness in NZ.
Countless reports from Consumer NZ and think-tanks have found that not enough Kiwis shop around enough for better deals on groceries, utilities, etc.
But that means work. We shop monthly, get our veggies weekly from a co-op and buy our meat by the quarter beast quarterly. Works out much much cheaper, but the separate trips and coordination are much harder than a weekly trip to the supermarket.
Work, and also space. Storing a quarter of a beast and a months worth of non-perishable groceries is not particularly practical if you live in an apartment or even a townhouse. There's also upfront costs of potentially having to buy a separate freezer.
Yes. We went vegetarian for 3 months to save up for the upfront purchase cost. And yes, bought a separate freezer for it. Well past break even now.
I am meat free more often than not. And we just don't have the space for a separate freezer to shop at scale like we'd need to in order to save money. The general creep of groceries means our shop is about $60 more expensive than it was pre-Covid. There simply isn't any more savings to make.
Food as well as rent are over inflationary items that people are screwed by to make others rich.
No competition is the main factor in the prices seen in New Zeeland, compared with others around the World.
Having owned a Super Market that I sold after building the Turnover 4 fold, in 4 years by dropping major priced items compared with my local competition proved my point to me.
I did work very hard to achieve this, then I retired. Debt free.
Competition is essential to get prices down.
If you knew what other Countries pay for their basic items, you would cry.....Foul. They are not taxed on food items.
Food is essential for life, as are many over priced items in New Zealand.
Taxes on all food are also the problem.
Big Profit essentials for life Plus GST......totally stupid. In my humble opinion.
Good post. Now do petrol. $USD 7.76 per gallon in NZ, about USD$4.10 in the US.
Taxes. Therefore concludes the comprehensive, detailed review. Move on, nothing to see here....
The taxman claims an extra 13c on a $1 increase in pump price of petrol in GST.
In 2018, NZ consumed about 13k TJ of petrol. 1 TJ is equivalent to 28k litres of liquid fuel. So if fuel prices go up by a dollar for a year, the government brings in $47m more in GST.
Compound that over the rising consumer prices of everything linked to global commodity prices (diesel, bread, coal, gas, etc.), it's not hard to see how the public coffers makes a windfall gain off the ongoing Ukrainian conflict.
Wow, I thought they might actually do something here, but once again the Comcom shows it's cowardice, teethless and clueless. A brilliant combination for such an agency.
" regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors " - I mean... REALLY? How the hell could anything like this be policed at the front end, it would just rely on suppliers complaining to the Comcom, which definitely would never get them in the Supermarkets. Kind of like how no tenant can go to the Tenancy Tribunal anymore because any future landlord asks whether you have ever been to the Tenancy Tribunal for any matter, on their rental agreements.
" Requiring grocery retailers to display unit pricing in a consistent format ". That will fix the problem of non-competition!
Absolutely pathetic. Although, come to think of it, are they signalling to overseas supermarkets "Hey, you can come here and charge huge amounts and we won't do anything about it".
Wouldn't even wipe my arse on that waste of time ... although with the way toilet paper prices are going I might need to.
FFS. And urban planning a scapegoat yet again? Total red herring.
Waste of space.
I'll say it again. A vote for a main stream party is a wasted vote.
Vote Natbour. We are one.
This report is going to get slammed by the public - we all know we are getting ripped off
Absolutely pathetic. This was an opportunity for the Comm Comm to make a real difference in the lives of all NZ'ers. This is the same outfit that allowed Foodtown to be swallowed up by one of the duopoly in the late 90's early 2000s. They're not really working for us are they.
Its time the public found out about supermarkets' excessive mark ups on meat and milk esp
It actually goes far beyond that as well. Let's just say the owners of some of Wellingtons biggest Supermarkets are very, very dodgy. One in particular that I know of treats their employees as exploitable assets, involving them in the drug business. Some of their staff having taken the fall for them a few years ago with a promise of recompense when they are released. Not to mention the weird booze fuelled parties with the staff members 1/3 of their age where even more dodgy stuff goes down. Rich/arrogant/bulletproof narcissists who think the world revolves around them (and most of it does thanks to the people involved).
Your headline is an insult to punch-pullers. There are people with no arms who could punch harder than the Commerce Commission it seems.
Another cop out report , do nothing what a surprise , suck it up nz .
What Cost of Living Crisis?
JA said yesterday there isn't one.
Don't worry, I haven't heard her reference the electioneering soundbite "Housing Crisis" in a while either.
Everything is awesome!!!!
She rejects the premise of there ever being anything bad ever.
Costco is coming. Hopefully they rattle a few cages.
It seems to me that if another competitor comes in ,one or both of the duopoly will suffer which will lead to lay offs and closures so in the end nothing achieved.
No wonder the masses are getting progressively more resentful and angry at a system that does nothing for the average working class citizen. Wether it be the RBNZ, Govt, or the Commerce Commission we are getting screwed at every turn.
We live in a world of selfishness where if individuals are doing well then there is no consideration at all for the greater good. Protect your wealth creation processes at any cost to the rest. The resentment over division and inequality in this country is going to absolutely explode in the very near future.
And we wonder why we had the riots in Wellington. This is going to get a hell of a lot worse before things change. How far do the public go before the government starts listening?
Well Jacinda is getting on a Plane...to waste even more of Taxpayers Munny......so do not ask her for Solutions. She does this quite regularly.....but now overseas soon...too.
exactly -- people wonder why Trump got elected -- but without Covid he was a shoe in for another term -- Vast majority of Ordinary people are being shafted by red and blue term after term -- if Winnie was 20 years younger now would be his chance to actually be the biggest party not just a bit part! Its there for the taking -- if half a dozen higher profile individuals got together to form a Ordinary PEOPLE FIRST party -
it was never going to be anything more than a virtue signaling exercise - after 4 + years of those why would we expect anything more from the handpicked limited scope consultants!
This would only make sense to me if they were sitting on a market entry application from a new participant and didn't want the new regs to also ping them.
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FSNI provides quarterly update on progress against Commerce Commission market study recommendations
12 July 2022
Foodstuffs North Island (FSNI) has today released its second quarterly update on its progress against implementing the Commerce Commission’s final recommendations from the retail grocery market study.
In April, the co-op launched a reporting dashboard to track its progress against the recommendations, and committed to publicly reporting on a quarterly basis via the dashboard. FSNI Chief Executive Chris Quin says a number of workstreams continue to be well underway to support competition in the industry and make sure that New Zealanders are getting value at the supermarket checkout.
“When the Commerce Commission released its final report on 8 March, we agreed with the Commission that those recommendations were both proportionate and would make a meaningful difference for consumers. We committed to being transparent and accountable for implementing the recommendations and are moving at pace to do that.
“Our latest dashboard update includes important recent developments and commitments in relation to the establishment of a Grocery Code of Conduct, the removal of restrictive land covenants, progress towards more unit pricing, and access to our co-operatives’ wholesale supply for non-member retailers that will collectively deliver better value for all New Zealanders.
“On wholesale supply for non-member retailers , work is well underway at the Government’s request to further develop our wholesale offer for retailers who are not members of our co-operative. Non-member retailers can now express interest in becoming wholesale customers and we’ve already received over 40 enquiries. The first step of making this work is understanding the customer need from these retailers who aren’t co-op members. We have conversations underway with those that have expressed interest and are engaging to establish their business needs so we can design a solution for them.
“ On Code of Conduct , we have been working constructively with MBIE in recent weeks towards a Grocery Code of Conduct for the industry and have indicated support for a set of principles that we believe will provide clarity, certainty, fairness, meaningful consequences, and opportunities for redress when the Code is not honoured. We also support the Commerce Commission’s recommendation that a specialist grocery regulator be established with appropriate powers and resources to monitor compliance with the Code and undertake effective enforcement action where appropriate.
“ On unit pricing , work is progressing at pace to increase the proportion of our products showing unit pricing which will help our customers make accurate price comparisons online and on shelf. We’ve recently completed Phase 1 which means the majority of eligible in-store products are now displaying unit prices. We’re on track to deliver Phase 2 by end of 2022 with various initiatives underway to make unit pricing more accessible for our customers.
“ On land covenants , we made the commitment in August last year to end the use of restrictive land covenants and exclusivity provisions in leases, and immediately started a process to remove all existing such clauses. While that process is underway no covenant or exclusivity provision has or will be enforced. We have now released restrictive covenants from all titles we own. The remaining covenants are registered on land we no longer own and we are approaching the owner of each parcel of land to remove these. Where we do not have the agreement of land owners to remove these, the Commerce (Grocery Sector Covenants) Amendment Bill removes that requirement so we welcome it to expedite this process.
“The Commerce Commission’s recommendations are focused on increasing competition to benefit consumers. The Commerce Commission was clear in its final report that supermarket returns in New Zealand were similar to those of other international grocery retailers in highly competitive markets like the UK, America and Europe.
“External factors driving this year’s food price inflation are not related to structural issues within the supermarket industry in New Zealand and shouldn’t be conflated with the Government’s policy response to the market study.
“We are addressing the immediate cost of living pressures for our customers by keeping costs under control within the 19 cents of every retail dollar on the supermarket shelf we’re responsible for.
“Food prices are at record highs globally, but we’ve managed to keep our food price increases below food price inflation levels. In May, food price inflation was at 6.8% and average cost price increases to Foodstuffs from suppliers was 6.9%, while retail prices to Foodstuffs’ customers on the same products increased 4.7% - meaning FSNI held prices at 2.1% less than inflation.
“Our Price Rollback initiative immediately reduced prices more than on 110 everyday items to 2021 levels, saving Kiwis more than $1 million per week on their groceries . It’s another way that we’ve been able to deliver value for customers in recent months, particularly in the face of rising inflation and increasing pressure on household budgets.
“Our customers trust us to give them a fair deal at the checkout. Four Square took out the top spots for Overall Satisfaction in the supermarket category of this year’s Canstar Blue Awards, with PAK’nSAVE and New World taking out the other spots in the top three. PAK’nSAVE has been recognised as New Zealand’s leading company for Fairness and one of country’s top 5 performing companies in the 2022 Kantar Corporate Reputation Index.
“Its top spot placing as Fairness Leaders is another nod to the great work PAK’nSAVE is doing to ensure it delivers NZ’s lowest prices to its customers every day and follows its win as NZ’s Most Trusted Supermarket in the 2022 Reader’s Digest Trusted Brands survey.
“New World also delivered a world class corporate reputation score in the index ranking at 14 out of 50. The Kantar Corporate Reputation Index measures excellence on four key platforms: leadership/success, responsibility, trust, and fairness (pricing).
“Our work to implement the Commission’s recommendations and being accountable for that is one way we can keep earning the trust of our customers.
“Our focus remains on implementing the recommendations that will deliver genuine change for the industry and ultimately benefit consumers.
“We will continue to provide quarterly public updates via our dashboard to show our measurable progress in responding to the Commission’s recommendations.”
The dashboard is available on the Foodstuffs North Island website here .
As the Commerce Commission found, there’s no magic way to make NZ supermarkets more competitive
Professor of Agricultural Economics, Lincoln University, New Zealand
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Alan Renwick does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
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The Commerce Commission’s much-anticipated review of supermarket competition has itself had mixed reviews. Many felt a major opportunity to reset New Zealand’s food system had been missed, others felt the commission’s final report got it about right – and supermarket owners probably breathed a little easier.
A review of the big players was certainly due. New Zealand has one of the most concentrated grocery retailing sectors in the world.
Foodstuffs and Woolworths control at least 80% of the market. There has been widespread concern they were using this dominance to the detriment of both suppliers and consumers , especially low-income households.
Beyond the perception that New Zealand food prices were too high, there have also been claims of a lack of clarity in pricing, that suppliers were being unfairly treated, and that competitors were being prevented from entering the market – for example, through the use of restrictive land covenants by the dominant companies.
To varying extents all these concerns were validated during the investigation. The commission recommended mandatory unit pricing (to allow simpler price comparisons) and a statutory code of conduct governing how supermarkets deal with suppliers.
But those measures won’t tackle the issue of high prices and profits due to the lack of competition, and this is where the commission’s light-handed approach has drawn most criticism. The trouble is, even a heavier hand might not have achieved the desired outcomes.
Breakups don’t add up
That the commission shied away from the more radical interventions discussed during the investigation – and which might have gone further than remedies considered in other countries – is not so surprising.
A cursory examination of proposals to restructure the sector – by forcing supermarkets to sell stores or by separating out their wholesale and retail divisions – shows the costs could potentially outweigh the benefits.
Losses in scale and efficiency through breaking up the supermarkets, and the complexity of trying to ensure wholesale markets worked, risk increased costs in the supply chain and even higher prices – the exact opposite of what was intended.
Read more: The pandemic exposes NZ’s supply chain vulnerability – be ready for more inflation in the year ahead
And it is certainly not clear that the much touted option of directly supporting the emergence of a third competitor in the market would remedy anything.
Moving from two to three players does not in itself constitute a magic leap from non-competitive to competitive markets. Three competitors can accommodate each other nearly as well as two!
Other countries – for example, Ireland and the UK – have faced similar competition issues, despite having five or more competing supermarket chains. It is not the number of competitors that matters, but the conditions under which they compete.
Insufficient remedies
To encourage competition without directly interfering in the structure of the industry, the commission recommended two main solutions: making it easier for competitors to access land, and that supermarkets offer wholesale supply to other grocery retailers on a voluntary basis (albeit with some regulation).
So the multi-million-dollar question – quite literally, given the financial stakes – is whether these changes are likely to increase competition and improve the situation for consumers and suppliers.
The answer is almost certainly no. Neither of the measures is sufficient to make emerging businesses viable. Given their size and power, the incumbent supermarkets could make it very difficult for new chains to establish a foothold and compete – by aggressive pricing in areas where new stores emerge, for example, or by upping their advertising spend.
Read more: Inflation is raising prices and reducing real wages – what should be done to support NZ’s low-income households?
Overseas experience tends to suggest that, overall, there is little in the commission’s recommendations likely to have a major impact on the way New Zealand supermarkets operate.
Many of the commission’s proposals have been implemented in one form or another in the UK and, to a lesser extent, Ireland. The UK began in the 1990s by issuing a voluntary code of practice for supermarkets. Its failure meant it was later replaced by a statutory code of conduct supported by the appointment of an ombudsman.
Ireland also introduced a statutory code of conduct in 2014 but has yet to appoint a regulator, while farmers have been protesting over retailers failing to pass on price increases.
The UK has now had the statutory code for nearly a decade. While it appears to have had some success , the fundamental imbalance of power remains a problem . Suppliers are unlikely to risk their businesses by complaining about their main or only customer.
Read more: The cost-of-living crisis will put more pressure on shoppers than COVID
Expect little change
As we see upward pressures on food prices from supply-chain disruptions and the direct and indirect effects of the Russian invasion of Ukraine, it’s more important than ever that food markets work well.
Scale is an issue. In the UK and Ireland, the emergence of German discounters has done more to increase competition than any actions by regulators.
But the combination of New Zealand’s remoteness and relatively small population limits the viability of increasing competition through encouraging new large-scale entrants.
This points towards a realistic approach that effectively accepts the current structure but with more stringent regulation of the supermarket chains.
Overall, the Commerce Commission’s recommendations may be a step in this direction. But it’s unlikely the country’s supermarket owners will have suffered indigestion after reading the report. And it’s also unlikely the price of tomatoes will be falling anytime soon.
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IMAGES
VIDEO
COMMENTS
We published our final report on 8 March 2022. We found that competition is not working well for consumers in the retail grocery sector and recommended a suite
suppliers which could impede innovation and quality; research indicating most of the competition measures for supermarkets, grocery stores
The Commerce Commission's final report from its study into the retail grocery sector has recommended a suite of changes to increase
The Government recently published its response to the supermarket study on 30 May 2022, accepting 12 of the Commission's 14 recommendations. In
On this page. Government response to market study; Recommendations for industry; Commerce Commission final report; Background; Further
The Government agrees that the use of covenants by major grocery retailers inhibits supermarket competition by reducing availability of sites for new entrants
The Commerce Commission has concluded competition is "not working well" in the supermarket sector, recommending a mandatory code of conduct for
The Commerce Commission's final report from its study into the retail grocery sector has recommended a suite of changes to increase competition
The Commerce Commission was clear in its final report that supermarket returns in New Zealand were similar to those of other international
The Commerce Commission's much-anticipated review of supermarket ... felt the commission's final report got it about right – and supermarket