Government to make 'urgent' legislative and policy changes as it aims to remove 'barriers' preventing competitor supermarkets from launching and expanding in New Zealand

The Government will be making legislative and policy changes so that new supermarkets can have an “express lane” to boost competition, Economic Growth Minister Nicola Willis says.

This would remove barriers preventing competitor supermarkets from launching or expanding in New Zealand, Willis says.

Earlier this year, the Government ran a Request for Information (RFI) process asking what would help challenger supermarkets take on the current duopoly.

“The responses revealed widespread frustration with restrictive zoning, slow consenting, and cumbersome regulations that make it extremely difficult for new competitors to gain a foothold in the New Zealand grocery sector," Willis says.

The Government has now agreed to introduce legislation so that new supermarkets could qualify as fast track referrable projects under the Fast-Track Approvals Act.

Legislation would be introduced to Parliament in November and passed by the end of the year. This would be supported by a new Government Policy Statement on Grocery Competition.

Alongside this, Willis says it will streamline building consenting processes for new supermarkets.

This would be done by choosing a single building consent authority “to standardise and streamline building consent processes for grocery developments that would enable competition regionally or nationally”, Willis says.

The Government would also amend Building Act regulations to facilitate pre-approved building plans for multiple grocery developments and improve the operation of the Overseas Investment Act regime by “clarifying the pathways available for grocery investments, including through grocery-specific provisions in the Ministerial Directive Letter”.

Willi says the Government would also be amending the Commerce Act “to better combat ‘predatory pricing’ with the introduction of an objective economic test for the prosecution of firms misusing their market power to exclude or stamp-out competitors” and explore options for potential food importers to bring in new product lines.

“Ultimately those businesses will make their own investment decisions about whether and when to launch new supermarkets - the Government’s policy changes are intended to give them more confidence to do so."

While the Government has been in talks with Costco, Willis says it’s disappointing that international retailers such as Aldi and Lidl decided not to take part in the initial RFI.

“It’s possible that the changes we are announcing today will encourage them to take a more serious look at New Zealand.”

Some respondents to the RFI discussed breaking up Foodstuffs and/or Woolworths.

“A decision to restructure the supermarkets is not a decision that would be taken lightly. It would be a significant intervention that would carry costs and risks that would need to be rigorously weighted against the potential benefits to shoppers.”

A cost-benefit analysis is underway on specific options for restructuring the duopoly, Willis says.

This would inform future advice the Economic Growth Minister says she would take to the Cabinet on whether more legislative changes are needed to improve competition.

“Our objective is a more competitive grocery market that delivers better prices and more choice for Kiwi shoppers. We remain open to potential market-led solutions that may be put forward by the major incumbents.”

'Time for half measures has passed'

The Grocery Action Group has welcomed Willis' fast tracking planning processes to support new supermarkets and it acknowledges the prospect of structural reform remains on the table.

"However, we urge government and policymakers to recognise that only bold, decisive structural reform - targeting both retail and wholesale - will deliver genuine relief to Kiwi consumers at the checkout," the group says.

Incremental measures are not enough, the group says.

Grocery Action Group chair Sue Chetwin says: "Breaking up this entrenched duopoly is the single most effective course of action if New Zealanders are to see lower prices at the checkout, and to see them quickly."

"The time for half-measures has passed. Meaningful, enforceable structural changes - alongside streamlined planning processes for newcomers - are the only way to ensure genuine competition, fair pricing, fair treatment of suppliers and a thriving, accessible supermarket sector for all New Zealanders," Chetwin says.

Labour's finance spokesperson Barbara Edmonds says "a fast-track regime for supermarkets makes sense, but it won’t make any immediate difference for New Zealanders who will keep paying high prices at the checkout today".

“Kiwis still won’t see their grocery bills coming down for years under National. Nicola Willis still doesn’t have a timeline for when a new player could come into the market."

'A big fat yes to new supermarkets'

When asked about some global grocery players not taking part in the RFI, Willis told the press on Wednesday afternoon that the country has a really strong welcome mat to present to them.

"I reckon they should give New Zealand another look."

Willis says "this exercise has made it clear: New Zealand has a reputation for being a really hard place to set up a supermarket. We have to change that reputation".

The Government's changes make it "crystal clear that instead of being one of the hardest places on earth to open a new supermarket, we're making ourselves one of the easiest places on earth to open a supermarket", Willis says.

"What we're saying is a big fat yes to new supermarkets."

When asked about how long New Zealanders would have to wait to find relief from their grocery bills, Willis says that is in the power of existing supermarkets right now.

"Any day, they can make a choice to reduce their margins and offer lower food prices for New Zealanders. The changes I'm announcing today will make it far more likely that they do so in future.

"Put it this way, if you're a New World or a Woolworths, and a new Costco opens up next door, chances are you're going to sharpen up your pricing."

Willis says the measure of success for her would be seeing a new chain of supermarkets opening up nationwide.

"That's the ultimate destination," Willis says.