Supermarket land wars: Kiwi shoppers' lot to improve after caveats outlawed - David Clark

Commerce and Consumer Affairs Minister David Clark says Kiwi shoppers will be better off once supermarkets remove all anti-competitive restrictive land title covenants.

He was reacting to the Herald article on national chain Countdown threatening to halve the rent it paid to landlords who allowed in competing food or drink sellers, according to lease documents - and sometimes rival pharmacies, florists and others.

"New Zealanders can be very happy to see these practices confined to the history books," Clark said of the now illegal caveats, with the Government forcing the duopoly of Countdown and Foodstuffs to unwind such arrangements.

Clark said outlawing such practices could only help consumers.

"For years, the duopoly was allowed to silently wage anti-competitive land wars on one another and their smaller competitors," Clark said of caveats in leases which sought to ban other grocers, florists, chemists, butchers, fishmongers and others.

"It meant the major supermarket brands could gain a foothold in a suburb or shopping centre, without the threat of a competitor setting up nearby and taking a slice of the pie.

"Limiting the options on offer for consumers severely restricts their ability to shop around for a better range of products, and of course, a better price," Clark said today.

Caveats in Countdown leases made clear that if landlords in development wanted the supermarket as a tenant, then other competing businesses would be excluded.

The anti-competitive practice is now outlawed and Countdown and Foodstuffs are being forced to unwind all their land war caveats.

Rival fish, liquor, meat, vegetable and grocery sellers were specifically named in Countdown leases, drawn up to control trade so the subsidiary of the ASX-listed Australian business had sole prerogative to sell its goods from properties it leased - often larger centres with many other stores surrounding the supermarket.

Countdown previously said it would halve the rent if competitors were allowed in. Photo / Hayden Woodward

There could be clothing shops, banks, pharmacies, gyms and other retailers in such larger centres, but no one else selling food or drink like Countdown does.

Clark said such practices were why at the end of June the Commerce (Grocery Sector Covenants) Amendment Bill passed into law, banning restrictive covenants on land, and exclusive covenants on leases. It also makes existing covenants unenforceable.

"We've also strengthened the Commerce Commission's information gathering powers. As a result, it has legal mandate to demand documents relating to contracts, arrangements and covenants to ensure they're complying with the law," the minister said.

Meanwhile, the Government continued to work at pace on a suite of other actions to increase competition across the grocery sector. This includes work on a regulatory backstop to ensure there is a wholesale access regime in place to support competitors entering the market, Clark said.

A mandatory code of conduct between major grocery retailers and their suppliers was also out for consultation.

One Herald reader said an Auckland suburban strip shopping area with a Countdown had barred competition and she was unhappy about that: "Countdown installed an instore chemist, then refused to renew the shop lease of the chemist shop and the florists shop, effectively ending their businesses."

Asked about the covenants and to list where they are, Countdown spokesperson Ally Orr said last week: "We won't be providing the details you've requested, but as per the law change any restrictive covenants are being removed. We support the law change that the Government has made regarding these."

Today, Matt Grainger, Countdown's director of format network development and property, said: "The number of covenants that are in place, and the existence of lease clauses of the type outlined, is irrelevant as they are no longer enforceable, as a result of the recent law change. Before the law change we had publicly committed not to include these clauses in new leases and not to enforce any historic ones. In our submissions to the Commerce Commission and Government we expressed our view that legislation was the best approach to addressing this issue, as we thought it would be quicker and give the broadest coverage."

Foodstuffs has said far more than Countdown on land covenants.

New Zealand's biggest supermarket chain has removed restrictive covenants on 78 of 135 affected titles or properties where it had tried to ban competitors from building or opening stores.

Quin: demonstrated how active Foodstuffs North Island is, axing land covenants. Photo / Supplied

Foodstuffs North Island chief executive Chris Quin gave those figures on July 12, telling how the co-operative which has Pak'nSave and New World was responding to the new law.

The sector had been outed in engaging in those anti-competitive land wars, buying up properties or dictating the terms of leases to try to stop any competitors from getting a foothold in dozens of areas throughout New Zealand.

The Commerce Commission estimated Countdown and Foodstuffs were making excess profits of about $430 million a year - more than $1 million a day.

As the political battle over the cost of living crisis rages on, the Government said that it reserved to go further than the Commerce Commission's recommendations if it saw the need.

The Commission made 14 recommendations, including introducing a mandatory code of conduct, establishing an industry regulator and ensuring loyalty programmes were easy to understand and transparent.

Clark said the Government had accepted 12 of the recommendations, adding the Government was putting the supermarket sector of "on notice".