New Zealand’s supermarket landscape is set for major change with the Government today revealing details of its formal response to the Commerce Commission’s market study of the industry.
Minister of Commerce and Consumer Affairs, David Clark said the Government’s message to supermarkets was clear – ‘change at pace to increase competition and be prepared for regulation’.
“The Government and New Zealanders have been very clear that the supermarket industry doesn’t work. 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,” said Minister Clark (pictured).
The report found supermarkets earn $1 million a day in excess profits, straight from the pockets of Kiwi consumers.
The Commission made 14 recommendations including introducing a mandatory code of conduct to establishing an industry regulator and ensuring loyalty programmes are easy to understand and transparent.
The Government has accepted 12 of the recommendations and is taking stronger action on the other two, Minister Clark said today.
“The two recommendations not accepted relate to implementing a voluntary wholesale access regime and to a review of competition in three years. These issues can’t be kicked down the road. We need to address the underlying drivers of the lack of competition now.”
“I spoke with both supermarket companies this afternoon to make this very clear. They know what is expected from them and the length of time we are prepared to give them to change before regulation kicks in.
“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.”
“Alongside the retail stores, supermarkets have wholesale arms. We are calling on the duopoly to open these up 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 taking these actions because if competitors don’t have proper access to wholesale goods, there’s no real incentive to enter the market. You can’t run supermarkets with empty shelves. And the New Zealand market clearly needs more competition,” he said.
Mr Clark said the Government was 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.”
“Whilst we work to establish an industry regulator the Commerce Commission will take on these responsibilities temporarily. 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.
“This work will sit alongside my Budget night legislation 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.
“It is important to get this right and I look forward to continuing to engage with the grocery industry as we move forward with this suite of changes through the Grocery Industry Competition Bill which I intend to introduce to the House later this year,” Mr Clark said.
The Ministry of Business, Innovation & Employment (MBIE) is also undertaking further work around requiring major grocery retailers to divest some of their stores or retail banners. Obviously this is a longer term piece of work due to its complexity, he said.