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8 May 2024

Australia's grocery sector recommendations highlights New Zealand's slow progress

Consumer NZ is urging our government to stand up and pay attention to the bold stance a Senate Select Committee has taken on supermarket activity in Australia.

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The Senate Select Committee on Supermarket Prices final report has recommended making price gouging illegal and introducing divestiture laws to create powers to break up Australia’s supermarket sector, if players misuse their market power.

“We agree, price gouging should be illegal,” said Gemma Rasmussen, Consumer head of research and advocacy.

“There’s no denying the supermarket sector in Australia has issues, but let’s face it, New Zealanders are facing a higher level of market concentration and our last robust study into the sector uncovered excessive profits. The question now is – has enough action been taken to address this historically problematic sector?”

According to Consumer, the recommendation to give the Australian Federal Court the power to break up corporations if they abuse their market power or act unconscionably, is seriously worth considering in New Zealand too.

“The big two in Australia have about a 65% market share, and here the duopoly enjoys about 90% market concentration.”

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On Monday a report released by the OECD recognised structural solutions, such as break-ups, could be warranted in New Zealand, given that market concentration in some sectors is so high that regulation will not be sufficient to improve competition enough.

“There’s a reason this recommendation keeps cropping up, and it is because it's going to take something drastic to create real change,” said Rasmussen.

Consumer’s latest sentiment tracking confirmed that financial concerns relating to the cost of food and groceries have been steadily increasing over the past three years. Three-quarters of New Zealanders list this as their primary concern, trumping all other costs.

A recent Consumer NZ grocery basket comparison between Australian and New Zealand supermarkets found little difference between the prices. However, the advocacy group says the key difference is the Australian government is tackling the situation there with fire and urgency.

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“It’s almost two years since the market study into the grocery sector in New Zealand, and shoppers are yet to feel much relief at the checkouts.”

Later this year, the inaugural report from New Zealand’s Grocery Commissioner will provide an insight into grocery profitability and supplier relations. However, the advocacy group remains concerned that simply 'shining a light' on the profitability and supplier relationships in the sector won’t do enough to force meaningful change to benefit New Zealanders, and government intervention will be necessary to fix the longstanding issues in the sector.

"To date, the approach towards our supermarket sector has been soft and steady. We have a commissioner, a new grocery code of conduct, and a progress report on the cards. The question is whether the current course of action is bold enough to clean up our grocery sector and deliver fairer prices for New Zealanders.

“We urge the New Zealand government to take a close look at the Senate Select Committee report and consider what it can learn from the bold and decisive recommendations.”

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