Thursday, May 23, 2024

‘Handshake’ supply deals shelved for $25b grocery sector 

Stamping out old-style ‘handshake’ supply agreements from New Zealand’s $25 billion grocery sector will help level the playing field and address a historical power imbalance and pressure tactics between the major retailers and the many thousands of businesses who supply them with produce and goods, the Commerce Commission declared today.

Grocery Commissioner, Pierre van Heerden says new rules taking full effect this month will help drive more effective negotiations between the major supermarkets and suppliers, creating opportunities for suppliers to thrive, and deliver long-term benefits for Kiwi consumers at the check-out. 

Mr van Heerden today sent an open letter to the sector, highlighting the Grocery Supply Code, and reiterating the obligations on regulated grocery retailers – Foodstuffs South Island, Foodstuffs North Island and Woolworths New Zealand.

The open letter reminds suppliers that there is no deadline for them to have signed any agreements from retailers.

“They are encouraged to take their time to review the terms, seeking legal advice or clarification from retailers if required,” the Commission said in a statement.

The open letter also highlights the Commission’s expectation that what is offered to suppliers complies with the Code but will now be monitoring compliance closely. 

Major supermarkets have had six months to ensure agreements were compliant with the Code, with a grace period which ended on 28 March. 

Mr van Heerden says the new Grocery Supply Code will provide transparency and certainty for suppliers, ensuring appropriate and comprehensive agreements with supermarkets and “encourage suppliers to negotiate the specifics of deals before signing”. 

“A handshake or verbal agreement is no longer good enough, and suppliers should not feel pressured into signing an agreement without the chance to negotiate the terms with a supermarket first,” he said.

“As one of the largest sectors in New Zealand, Kiwi shoppers should trust they are getting a fair deal at the check-out… and that suppliers of their trusted products are being treated fairly and transparently by supermarkets. 

“This is a $25 billion sector, and with deals often being made ad-hoc, verbally and at times pressuring small suppliers, this new Grocery Supply Code is about formalising more comprehensive agreements – creating more transparency and certainty for suppliers about what they are signing up to, protecting them from unfair conduct, so they can better compete and succeed.”

With the Code now in full effect, the Commission will be monitoring supermarkets closely, looking at their compliance with the Code and also whether any improvements need to be made to the rules put in place.

Feedback was provided to supermarkets on their draft agreements earlier this year, and the Commission says it has been encouraged to see the supermarkets take its comments on board.

The feedback (sent within compliance letters), along with today’s open letter, have been published on the Commerce Commission website here.

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