Greens lobby Commerce Minister to get competition watchdog to probe supermarkets after petrol companies under soon-to-be-bolstered powers

The Green Party wants the Commerce Commission to use its soon-to-be-bolstered powers to investigate supermarkets after it probes petrol companies.

Green Party MP Gareth Hughes says, “For far too long, the supermarket duopoly between Foodstuffs and Woolworths has hurt producers, growers and small business in New Zealand.”

He maintains a market study will benefit both suppliers and consumers.

Prime Minister Jacinda Ardern on Monday announced the passing of the Commerce Amendment Bill would be fast-tracked, enabling the Commission to do market studies if they're in the public interest, rather than only if it identifies anticompetitive behaviour.

Once the Bill is passed in coming weeks, there will be a month-long transition period before the Act becomes operative.

During this time Commerce and Consumer Affairs Minister Kris Faafoi will ask Ministers to nominate markets they’re concerned could be functioning sub-optimally and not serving consumers’ best interests.

However Faafoi has supported Ardern, who’s made clear the petrol industry will be the first to be probed.

Under the Bill, both the Commission and the Minister of Commerce have the power to decide which industries are investigated.

The Commission says the extra $1.5 million it was allocated in the 2018 Budget, in anticipation of the Bill being passed, is enough for it to do one study at any given time.

Faafoi understands the Commission is bringing in expertise for its market studies team.

Neither him nor the Commission will pre-empt which markets they would like to see investigated after the petrol sector.

Hughes says the Green Party has long called for New Zealand supermarkets to be fairer and more transparent.

“In 2014, the Green Party introduced a Bill to Parliament that would ensure a Compulsory Code of Conduct and an adjudicator that would investigate and resolve breaches of the code,” he says.

'Slipped through the cracks'

The Food and Grocery Council, which represents the major manufacturers and suppliers of food, beverage and grocery products in New Zealand, supports the Commerce Amendment Bill. 

In June it submitted: “In the past decade we have observed an increased international focus on supermarket buyer power, but this issue and its potential impacts are yet to be studied in New Zealand.

“We note that in 2001 Progressive Enterprises Limited was cleared to acquire Woolworths (New Zealand) Limited, reducing the number of supermarket retailers in New Zealand from three to two."

It said this merger was allowed to proceed under an old test, even though it failed the current one, which was being introduced at the time. 

“As it stands, the current competition law regime in New Zealand lacks some of the regulatory safeguards that are available in other jurisdictions," the Council went on to say, pointing out Australian regulators have more robust powers. 

“Australia also has a prohibition against unconscionable conduct, a prohibition against unfair contract terms in business-to-business contracts and higher levels of industry-specific regulation (such as the Food and Grocery Code of Conduct)...

“The Australian competition regulator is also empowered to accept enforceable undertakings, which is also proposed in the Bill.

“As such, we consider that a market studies regime could be particularly impactful in New Zealand by focusing on competition issues that have hitherto ‘slipped through the cracks’..."

'Expensive, time consuming and distracting'

Retail NZ on the other hand opposes the Bill. It submitted: "It is not clear that tasking a government agency with specific powers to undertake competition studies will lead to improved outcomes for consumers. 

"Being the subject of a competition study is expensive, time consuming and distracting... [This] creates costs for business, which ultimately will be passed onto consumers."

Retail NZ said that should the Bill pass, the Ministry of Business, Innovation and Employment should be tasked with overseeing the market studies. 

“The purpose of competition studies is to obtain data to determine if a policy intervention is necessary to improve the operation of a market. This would conflict with the Commerce Commission’s investigation and enforcement function.”

Accordingly, Retail NZ said studies should only be imposed at the direction of the Minister, “where there is clear evidence of significant public or industry concerns that need to be addressed”.

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33 Comments

High time. Travelling on Europe makes me realise how we are being ripped of in NZ. The food prices here
are amazingly low.

No they aren’t. They are as bad if not more expensive. I paid €11 for a chicken roll in Paris. I bought 4 Heineken’s for £10 in a 7-11 like store in Gloucester road in London.

Give some examples of your argument is a waste of time.

Aldi or Lidl in Germany provide good examples.

Yeah the Aldi in Australia is far cheaper than NZ supermarkets. We need them to come here.

Sounds like you went to all the tourist traps. When I was in Europe the only ripoff supermarket I visited was in the middle of Amsterdam. Even the tourist towns in rural France have good deals. For instance I bought a decent size jar of pesto for 1 Euro which costs about $8 here. A 7-11 is not a supermarket. Neither is an Aldi/Lidl to be honest as they have a very limited range.

You need to look at Carrefour and Kaufland - both full size supermarkets with delis, alcohol, baby cheeses etc and much much cheaper!

I should post a copy of my supermarket bill. Fist size piece of Mozzarella cheese from Lidl In Munich is 0.35 Euros. NZ kiwifruit 0.45 euro each. NZ Sauvignon blanc 4.5 euros. I don't think I saw it that cheap in Pack N Save in Glen Innes.

Auckland comes in at number 91 on this cost of living index, London and Paris come in at 27 and 28 respectively.
This index does not include rent.

https://www.numbeo.com/cost-of-living/rankings_current.jsp

That website is superb, thanks. The best indicator of overall cost of living relative to incomes is the 'local purchasing power' indice. That shows Auckland's horrendous cost of living, with Auckland ranked 229 (the lower the ranking the higher the cost of living relative to income). Right next to London at 230. By comparison, Aussie cities have much better local purchasing power - Perth is 33, Brisbane 51, Melbourne 88.
People who think Auckland is not expensive need their heads read, or at least need to get out of the country a bit more.

Countdown is owned by Woolworths Group and is publicly traded. Their operating margins are around 2.5%, more than double the industry average. Grocery stores aren't supposed to be wildly profitable, but barely break even due to the nature of the business, ie consumer staples selling at high volume.

I'm just surprised that competition hasn't moved in, given the high margins seen in the New Zealand grocery industry. Aldi, Wal-Mart, Costco, or Tesco could put these clowns out of business tomorrow.

Anyone know if there are government restrictions in place preventing this? Doesn't seem logical. And don't give me that line about being far away, and we don't have the population to support it. The margins are clearly there.

Is our market so small that an extra player would just saturate the market?

If it was profitable they would be here now. The market is too small for them

The top 1% control the supermarkets as they do the distribution companies, have you noticed both sectors are full of low cost immigrant staff? This gives both sectors a considerable amount of INFLUENCE over how much it costs you and I to eat and the ability of a supplier to get their product to market. Break it up.

So to be in the grocery business is to be a social service. The reason the Tesco's of the world aren't here is fairly obvious just too hard and too small a market.

Also hard to get decent real estate. I hear supermarkets buy up reasonably located commercial property and then resell it with a convenant preventing it becoming an opposition supermarket. They also have some dodgy dealings with the big brands. Remember the warehouse tried to be a supermarket but the duoploy threatened the big brands not to sell to them.

In 2001, that was under the Clark Cullen government, how did the rationalisation from 3 to 2 get the go ahead? Who signed it off? Who got the money? Its no small thing that most of this country's 1% own the nations supermarkets. Will Interest dig into this story?

supermarkets have such a huge dominance simply because they are far superior method of distribution compared to other methods. Even online shopping has not put a dent in their powerful positions.

Unless there are new methods of distributions superior (or at least as effective and efficient) to the supermarket-based one, the supermarkets will continue to enjoy their superior position in the supply chain and will continue to buy cheap from suppliers and sell expensive to buyers (because even with these prices, both supplier and customer are still getting more value than if they were doing it in any other way).

This is not to say that increased competition between supermarkets is not effective, but a country almost as large as Japan and the UK with a population only a fraction of them, is unlikely to be able to attract many serious competitors. The reward only worth it if you get something like 50% of the market which limits the attractiveness of the market for any potential new entree

Maybe that just suggests the next disruptor of the grocery retail sector would need to come from a company with supply chain as their core business. As AliExpress to durable retail.

And a change in consumer habits to match. Perhaps to a combination of farmers' markets for fresh fruit and veges, and the supply chain company for more travel-friendly goods.

distribution in NZ is hard and expensive and the opportunity is small relative elsewhere. <5 mill customers on 2 islands, challenging difficult topography, 1000's of km from top to bottom, and remote from the large supply sources. The big global chains can make better use of their capital in Asia, Africa, and yes Europe.

Maybe we could lobby the military to throw all the greens MPs out of helicopters.

I'm really tired of out of touch champagne socialists blaming 'big business' for situations brought about by the biggest monopoly of all - a fat, bloated, high tax welfare state. Is it cApItAliSmS fault that food is so expensive, or could it have something to do with that 15% GST their centre left friends in the national party raised?

I'm sure they will see the light after reading your intelligent post.

Are you an intelligent person, solardb?

Rate yourself on a scale of 1-10.

Be quiet back there Greens! You’re not even in Cabinet.

While I welcome a probe this is all just more working groups and committees. We know supermarkets are ripping us off. We know the prices are completely arbitrary, the specials are fake and the club cards are spying on you and selling that data to your bank and insurance provider.

Capitalism is supposed to work best with information symmetry. Without even breaking duopoly we could make sure the price signals are clear. Let's do this:

* force every supermarket to publish their prices and stock levels online
* ban loyalty cards
* ban bundling of products
* ban fuel discounts
* ban coupons

Nothing like this will happen because our politicians are the same old liars wearing different colours. The 5% rule keeps out any party that could make a difference.

There are also the issues around land banking and the RMA which effectively prevents new supermarkets being built as they need huge land parcels.

Really ripping us off it would surely it would show in their trading profits right Countdown made less than 5% profit last year a wafer thin profit at that I would suggest. NZ is a tiny market with high distribution costs. Stop falling for this political nonsense a distraction from a hopeless Govt

A lack of competition doesn’t always show as big profits. It’s probably just terrible efficiency from not having to compete. Surely distribution costs don’t equate to milk being double the price as the UK? NZ is the only country I know of where milk is cheaper at the petrol station than the supermarket.

.. which is why so many UK dairy farmers are exiting. can't make a living.

Green Party MP Gareth Hughes says, “For far too long, the supermarket duopoly between Foodstuffs and Woolworths has hurt producers, growers and small business in New Zealand.”
I guess most will have read the first word and turned off allowing their prejudice to drown a very good point. But then often

NZ needs Aldi for more competition!
When Aldi set up shops in Australia in 2001, Coles and Woolworths had a good laugh at them, now they have 14% market share!

All we can ask from all these comments is please, base your comments on the what is being proposed, not who is proposing it. There is too much political bias in NZ. Unfortunately I feel NZ cannot move forward in a sensible manor until we tackle this deep seeded problem.

All we can ask from all these comments is please, base your comments on the what is being proposed, not who is proposing it. There is too much political bias in NZ. Unfortunately I feel NZ cannot move forward in a sensible manor until we tackle this deep seeded problem.

Why do we have this commerce commission? We get ripped by power companies, petrol companies, building supply companies, parking companies, supermarket....commerce commission just asleap at the wheel collecting pay and doing what??? National investigated the petrol companies and now labour want to do it again. We pay these people to govern and all thry do is get in the way and muddy the waters.

To steal an oldie but a goodie - why is there only one Monopoly busting body?

Exactly right Bones.

The government needs to amend the legislation under which the Commerce Commission operates so that it is required to put much more weight on the HHI index (measure of the degree of competition in the market) when considering mergers and takeovers.

The CC even needs to the given the powers for force demergers - eg Z Energy.