A shake-up of the grocery sector will see New Zealand’s supermarket duopoly forced to sell groceries to their competitors at set prices and terms if they fail to adequately wholesale market voluntarily, the Government announced today.
“No ifs or buts, greater competition, a wider range and cheaper products will be provided to New Zealanders through these changes,” Commerce and Consumer Affairs Minister, David Clark said.
“The Commerce Commission found New Zealand supermarkets earn $1 million a day in excess profits because of a lack of competition. These regulatory measures will deliver a more competitive wholesale grocery market.
“With New Zealanders experiencing pain at the checkout this is one action we are taking to tackle the causes of cost of living increases.”
Minister Clark said the Government had ultimately decided to take stronger action than the Commerce Commission had suggested.
“They said any wholesale regime should be voluntary. We’re not confident that will deliver the results consumers deserve,” he said.
“Alongside their retail stores, supermarkets have behind the scenes wholesale operations. The changes announced today will ultimately require the duopoly to open these up to would-be competitors.
“Our plan will give a leg up to the likes of smaller retailers and new market entrants. It means other retailers will now be able to source and sell a wider range of groceries at better prices.”
Under the changes, the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms.
“However, if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices.”
“Ultimately if these interventions don’t 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.”
He said the new system will incentivise the major supermarkets to “play fair”.
“But if they don’t the Commission will be able to use powerful new tools to make them do so,” said Mr Clark.
“Supermarkets are well advised to lock in good-faith wholesale arrangements on their own terms, or we will have no problem stepping in to make it happen.
“The grocery sector needs to change, so that competing retailers – whether they are independent dairies, smaller chains, or a new entrant – can offer a wider selection of products at competitive prices.”
The Minister said the Government was also building flexibility into its approach to a collective bargaining exemption for grocery suppliers.
“Many suppliers, particularly small ones, are unable to effectively negotiate terms of supply with the major grocery retailers on their own. This exemption will allow greater scope for them to do this collectively, helping to address imbalances in bargaining power.”
“The Government is working to address the systemic lack of grocery competition in New Zealand. Today’s announcement is just the latest in our plan to deliver a fairer deal at the checkout for Kiwis,” Mr Clark said.