Consumer advocates say more action is needed by the Commerce Commission and Government to increase competition in the grocery sector after the commission’s first annual grocery report found there had been no meaningful
Grocery competition: Consumer advocate calls for faster action to ease checkout pain
“Ultimately, it is the role of the Government to introduce greater intervention like structural change and market break-ups - so the question is how long will New Zealand shoppers be expected to wait for an improved market or more drastic action?”
![Grocery Commissioner Pierre van Heerden is acting ahead of schedule, but another inquiry will delay any change. Photo / Mark Mitchell](https://www.nzherald.co.nz/resizer/v2/KCSOSHSRP5CGJJW6VYOJB6W5RY.jpg?auth=09cf8b4aa745fe134356a6456fe4916ed648846ee986aa6a1da6dee540f54da1&width=16&height=12&quality=70&smart=true)
What is the Grocery Commission doing?
Grocery Commissioner Pierre van Heerden said the commission was using every tool it had available.
“We’re working at pace. We’re actually working ahead of the schedule that’s been put in place in the legislation,” van Heerden said.
“The grocery supply code‘s only been fully effective for five months. We’ve seen it’s not working, so we’re pulling the trigger and we’re doing a review now. We’re not waiting for two years.”
Alongside the review, the commission intends to launch an inquiry under sections 55 and 56 of the Grocery Industry Competition Act to determine whether wider regulatory changes are necessary.
“In the Grocery Industry Competition Act, there are backstops. Those backstops, though, require us to do an inquiry first, then give a report to the minister and say, here you are. We’ve got backstops in here that can be unlocked,” he added.
One of those potential backstops he suggested that could be unlocked to increase competition could be non-discriminatory pricing, forcing supermarkets to provide wholesale goods to rival grocery retailers at the same prices.
Van Heerden said the current wholesale regime is not working as intended and the commission will be establishing a Wholesale Code with expectations for the sector.
He suggested some rules may relate to suppliers who are opting out of wholesale, and supermarkets that have not placed their private labels into the regime.
![Commerce and Consumer Affairs Minister Andrew Bayly says the Overseas Investment Act review, in tandem with the Government’s Resource Management Act changes, will make it easier for new competitors to enter the grocery market. Photo / Mark Mitchell](https://www.nzherald.co.nz/resizer/v2/RM2HKQ4ZSNHZTKEZROU6G24Y3U.jpg?auth=ba4462600e946d9a6fa4acd591dd338bd565164865fe5a607b968eb39f08c9c7&width=16&height=11&quality=70&smart=true)
Minister points to RMA reform and opt-out provisions
Minister for Commerce and Consumer Affairs Andrew Bayly said it was disappointing that there had been no meaningful change identified within the report, but welcomed the commissioner identifying areas of action.
The report detailed the barriers the regulatory environment adds to market entry, but the minister spoke passionately about the need to also address opt-out provisions currently available to domestic suppliers.
“We’ve had a number of suppliers opting out. There are always much lower costs for home-brand products for supermarkets. I argued for a long time that they shouldn’t be any different, that people should be able to access the lowest price,” Bayly added.
“What this report’s all about is, how do we get better transparency and better accountability within the existing supermarket industry so that people can at least have the opportunity to compete.”
New entrants to the market face an uphill battle, with the report pointing to zoning requirements and the resource consent process as key regulatory hurdles.
The minister said the review of the Overseas Investment Act, alongside the Government’s changes to the Resource Management Act (RMA) will make it easier for new competitors to enter the market.
![Costco opened its first store in Auckland back in 2022, but the retailer does not have the physical footprint to pressure the major supermarkets. Photo / Michael Craig](https://www.nzherald.co.nz/resizer/v2/72HXHWZ3L2FDT4ZL3FQ7WR5W7E.jpg?auth=523a70a95457ca834a6d8a419defe1da70b55fd507c640de99ffbdfaca1dc31d&width=16&height=11&quality=70&smart=true)
The report highlights Costco’s entry but acknowledges it didn’t have the physical footprint needed to be circuit-breaking.
It also highlighted The Warehouse’s grocery offerings, which are steadily increasing across its stores.
However, the business has stated it has no intentions of raising the capital required to try to compete with the major supermarkets.
Other international supermarket chains, namely Aldi and Lidl, were looked at to see what impact they have made in Australia and Finland, but their market share has taken years to develop.
“What we also need to bear in mind is Australia and Finland didn’t have this regime in place that we’ve got in New Zealand. Our grocery regime is a world-first,” van Heerden said.
The commissioner believes investment from private equity in the market could be a potential option.
Bayly said that in speaking to Costco’s operators, “the barriers they experienced were not the ones that might have otherwise been perceived to have been the big barriers”.
The minister confirmed he has spoken to potential third-party operators and wanted to create an environment welcoming to them.
“I’m sure everyone wants to see a third party. The trouble is, you can’t dream up a third-party operator,” Bayly added.
Land-banking a concern
Another key issue hampering new entrants into the market is access to land.
The report explains that while progress has been made thanks to the removal of restrictive land covenants, including the successful case earlier this year against Foodstuffs North Island, “land-banking” by the major retailers is still a concern for the commission.
More than 100 “land-banked” properties were identified by the commission, with several properties having been owned for more than 20 years without being used.
“We want to identify each one of them, get into the detail, see what they’re being used for. What are the plans for them? A lot of the supermarkets might have plans for those properties, but then we want to see those plans in the short to medium term,” van Heerden said.
Bayly agreed the issue was a concern, but emphasised that any eventual decisions would depend on what the plans were for the identified sites.
“There is an issue if some of that land, depending on what it is, whether that is in contrary to the Commerce Act,” the Commerce and Consumer Affairs Minister said.
“If he [the Grocery Commissioner] was to come back and say, not only is it substantial and it is contrary, well, that’s going to dictate what I might do.”
The commission will report to the minister before the end of the year on the state of “land banking” currently occurring, with an issues paper on the inquiry into sections 55 and 56 expected in October.