Commerce Minister Craig Foss says Commerce Commission has widened its inquiry to all New Zealand supermarkets

Commerce Minister Craig Foss says Commerce Commission has widened its inquiry to all New Zealand supermarkets

By Bernard Hickey

Commerce Minister Craig Foss has told Parliament the Commerce Commission had confirmed it would conduct a formal investigation into the entire supermarket sector.

The Commerce Commission announced last week it was investigating the allegation made under parliamentary privelege by Labour MP Shanes Jones about a 'Coundown Shakedown', whereby Countdown forced suppliers to make retrospective payments for previous losses suffered by Countdown, or lose their shelf space.

"I can confirm that the Commerce Commission has launched a formal investigation into the Supermarket sector in New Zealand," Foss said in answer to another question from Jones.

But the Commission did not say in last week's announcement say it would be conducting a wider formal inquiry into the supermarket sector, as was done in recent years by anti-trust watchdogs in Britain and America. The Commission issued a statement late on Thursday confirming it was "formally investigating the allegations of anti-competitive behavior towards suppliers by Countdown."
"The investigation will involve seeking a wide range of information from a variety of sources, including organisations from all areas of the supermarket sector. The investigation is expected to take a number of months," it said, adding it would not make any further comment on "this active investigation."
The Commission went on to encourage any with any relevant information to contact us on 0800 943 600. "They can request that the Commission keep their identity and/or the information provided confidential. TheCommission will not disclose the identity and/or information unless consent is given or the Commission is required to by law. If confidentiality is a concern then it should be raised when first contact is made with the Commission," it said.

The Woolworths-owned Countdown has a 45% share of the supermarket market in New Zealand, while the remainder is owned by the New Zealand-owned franchise-based Foodstuffs Cooperative and its members.

Meanwhile, Jones asked Foss about a voluntary code of conduct agreed between Supermarkets and Suppliers in Australia, which bans such retrospective payments.

Foss said the Australian code had been accepted by the Australian Government, but was now being considered as a formal regulatory tool by the Australian Competition and Consumer Commission (ACCC).

The ACCC began an inquiry into relations between Supermarkets and suppliers in February last year and has already backed the use of a such a code as a legally enforceable code. See more here at Australia's FoodMag.

"It is not yet fully in play as law is concerned. Of course we are watching all developments in Australia, including the root and branch review of all competition matters," he said.

Foss was later asked by Green MP Mojo Mathers if he would support a code of conduct governing relations between Supermarkets and suppliers with an adjudicator with powers to enforce the code.

"I would be supportive of any voluntary code of conduct between supermarkets and suppliers that would benefit New Zealand families," he said.

Mathers then asked why the Government didn't proactively introduce an enforceable code of conduct, as had been done in Britain.

"I imagine the Commerce Commission, once it has finished its current inquiry, this may well be the result of it (the formal industry wide inquiry), we'll just have to wait and see what the Commerce Commission come up with," he said.

Jones said the wider inquiry was a victory for local firms and consumers, adding he would visit the Commission in person later today to ask for a well resourced and wide ranging inquiry.

"The Commerce Minister Craig Foss has been missing in action on this issue. He has done nothing but make light of my accusations," Jones said.

“He is now embarrassed that my pressure has been vindicated. I think most Kiwis feel he has ignored these problems for far too long."

Jones attack tightened

On Wednesday Jones zeroed in on an Australian manager working for Progressive in New Zealand, although he stopped short of naming him. 

Jones said the person at the centre of his allegations was an Australian merchandise manager who had worked for Woolworths and then, because of the ACCC inquiry, fled to New Zealand to work for Progressive.

Jones spoke of an email describing demands by Progressive for a supplier with turnover of NZ$4.5 million to pay tens of thousands of dollars "by 5 o'clock...or it's good night Irene." Countdown declined to confirm the identity of the Progressive manager, whose name is now circulating in media and political circles.

"He fled into Woolworths, Countdown here in New Zealand. He is the person who has caused these dramas—an Australian merchandise manager—and I look forward to providing his identity to the Commerce Commission," Jones said in finishing his latest comments.

Jones earlier used a question to Craig Foss to accuse Woolworths (and Fletcher Building) chairman Ralph Waters of calling New Zealand suppliers to threaten them with removal from Australian stores if they got involved in the Commerce Commission inquiry. Waters later denied the allegation.

Business NZ objects

BusinessNZ, which represents large businesses including Progressive and Foodstuffs, said it was concerned about the continued use of Parliamentary privilege to make the allegations about Countdown, which it said should be used judiciously and had the potential to damage related or innocent parties.

“Where allegations are made under Parliamentary privilege in a controversial manner over the course of many days before being referred to the relevant authorities, there is the potential for significant reputational and commercial risk," said BusinessNZ Chief Executive Phil O'Reilly.

“The risk is compounded by the fact that some of the allegations relate to alleged criminal behaviour and others relate to competition issues. The release under Parliamentary privilege of Mr Jones’ complaint to the Commerce Commission relates to the competition issues raised by Mr Jones, and an inquiry has now been launched. However, other allegations by Mr Jones relate to criminal behaviour including alleged blackmail and fraud, and no claims have yet been made to the NZ Police," O'Reilly said.

“This puts the subject of the allegations in the position of being tried in what is effectively a kangaroo court – with serious allegations made but not justified with evidence in a proper judicial process. This poses risk not only for the company that is the target of the current allegations, but for any other company that may be treated similarly in the future," he said.

“Businesses in New Zealand would be concerned about the chilling effect of Parliamentary privilege being used in this way in the future.”

(Updated with more detail on code of conduct, more Jones allegations, Jones welcoming the inquiry, the Commerce Commission confirming the broader inquiry and BusinessNZ objections to Jones' repeated use of parliamentary privilege to air the allegations)

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Good.  Supermarkets are bullies and thugs

These allegations have been made by a man who wanted taxpayers to pay for his adult movies that he watched behind closed doors.Now he is using the closed doors of paliament to do to supermarkets exactly what he was watching in his motel unit.

Makes sense that if only Countdown was doing it, the suppliers would have boycotted them and sold to the others who weren't.

Good News , I have been banging on endlessly about this oligopoly .
Its a very unhealthy state of affairs to have such a concentration of market power

The terms of reference appear to be restricted to examining allegations of forcing suppliers to pay for past losses
The practices go far beyond just one category
As to the complaints by Business NZ who say "allegations should be used judiciously and had the potential to damage related or innocent parties"
I personally know of two suppliers who have been squeezed out of business by the supermarket giants, lost their livelihoods, their businesses, their superannuation, all at the hands of the big two. Destroyed would be a better term. No redress for them
No mention of any examination into the "fake food" business that is forced onto suppliers, as mentioned by Gareth Morgan

Oh they will just slap around a couple of people at Countdown, or even feed them to the wolves.  That will fool enough people.
But what really is needed is an acknowlegement of the monopoly status, and how that works for the monopolist, but no other stakeholder.
The monopoly needs to be busted.  2 chains into no less that 10.
You might have thought that the National Party was in favour of free market forces.  But no.
So should be 'BusinessNZ'  Obviously not.  Phil O'Reilly makes it quite clear that he is anti business.   He's picked his horse to back.  New Zealand business people will remember. 

Agreed KH we need a trust buster.

Pleased to see that Phyl O'Reilly from Business NZ has separated out the issues.
There is nothing to stop food suppliers/manufacturers from forming their own Co-op type structure and opening up their own supermarket chain in NZ which would be excellent from a competition point of view. It could also be a reality check for some suppliers/manufacturers.
The terms of the supplier contracts with Countdown will be important and so far I have not read anything which refers to the contracts. Shane Jones knows that there will be contracts in place, so I will assume that he would have had to have read many of the contracts to form his opinion.
Supermarkets have to shift product fast (there's no money to be made if product sits on the shelf) and if those products aren't popular and not moving from the shop shelf then how does the supplier/manufacturer of the product know their particular product/brand is not what the consumer is buying anymore?
If a supplier/manufacturer enters a contract with a supermarket for shelf space to obtain a higher public profile of their product then I would assume this is a contractural arrangement between the two parties. 

Cost to enter the market.