Australia vs NZ: Supermarket competition compared
The Australian Competition and Consumer Commission (ACCC) has released a new report into supermarket competition across the ditch. We explain what the watchdog recommends and how its proposals differ from New Zealand's approach to the problem.
The ACCC has released the final report in its year-long inquiry into supermarket competition in Australia. It found the sector isn’t working well for Australian consumers or grocery suppliers.
The ACCC says the supermarket sector is dominated by Coles and Woolworths, the key Aussie players. Their collective influence over the sector has given rise to the humorous moniker “Colesworth”, but their power is no laughing matter.
The ACCC found Coles and Woolworths are two of the most profitable supermarket chains in the world, alongside hard discounter ALDI. Its report made 20 recommendations to address issues in the sector.
But the report has also reignited concerns about a lack of action here in Aotearoa.
The Australian grocery ecosystem mirrors our own, where two significant players dominate the supermarket sector. Our Commerce Commission (the Commission) released a similar report in 2022. But there has been no improvement following that report.
So, what has gone wrong?
Recommendations compared
We’ve grouped recommendations from both reports into the following key themes and compared each country’s approach around each theme.
Addressing land banking and planning laws
Land banking is a kind of anti-competitive behaviour. Supermarkets buy land with no future or immediate plans to develop it. This affects competitors by reducing the number of appropriate supermarket sites that are available.
The ACCC recommended Australian state governments adopt measures to address planning and zoning issues. However, it may be difficult to implement this recommendation as all the country’s state governments and local councils would need to align their approaches.
In Aotearoa, the Commission made a similar recommendation to improve the availability of sites for retail grocery stores under planning law. We haven’t seen any changes yet.
The Commission also recommended parliament introduce legislation prohibiting restrictive and exclusive land or lease covenants.
Land covenants are conditions placed on the land’s title. Lease covenants are similar but are usually found in a lease agreement rather than on the land’s title.
A restrictive covenant in the grocery sector inhibits store development. Parliament passed an amendment to the Commerce Act, with that amendment coming into force in June 2022.
As a result of these changes, as of 2024, a total of 93 land covenants and 26 lease covenants had been removed, leaving 21 unenforceable land covenants in land deeds and 105 unenforceable lease covenants in contracts.
While the duopoly’s number of unused properties has decreased overall, Foodstuffs South Island has increased its numbers. At the time of the market study, the duopoly had 32 properties that hadn’t been used in retail operations in more than 20 years. And as of 2024, it had 46 unused properties.
The new law was responsible for a record prosecution in the High Court in 2024. Foodstuffs North Island was fined $3.25 million for lodging anti-competitive land covenants.
The Commission also recommended the introduction of a law to monitor land banking. Land banking will be a focus for the Commission over the year.
Grocery Commissioner Pierre van Heerden (the Commissioner) noted that work is still to be done in this space.
“I still have concerns about that amount of land being held but not actively utilised by the supermarkets, and we cannot turn a blind eye to any practices that may [be] hindering competition,” he said.
Enabling fairer supplier relations
The ACCC’s report had a significant focus on supplier-retailer relationships. Australian supermarkets have all the bargaining power when it comes to contracting with suppliers. They can exercise this power to obtain lower or more consistent wholesale prices. Unfortunately, as the ACCC noted, savings aren’t being passed onto consumers, and instead, profit margins have increased for the big supermarket retailers.
The ACCC suggested several recommendations to make these relationships fairer, particularly for fresh produce suppliers. These recommendations focused on requiring supermarkets to provide suppliers with more information to help balance out the distribution of power in the relationship. They covered:
supply forecasts
weekly tendering processes
wholesale fresh produce prices.
The ACCC also made the following recommendations:
Traders selling fresh produce on behalf of growers should be more transparent about their sales, including about which supermarkets they sold their produce to, for how much and how the prices were determined.
Supermarkets should confirm orders from suppliers of supermarket-branded fresh produce earlier to improve certainty of supply requirements.
Suppliers should be allowed to apply their own branding to the fresh produce they supply.
Supermarkets should be more transparent about the rebates they require from suppliers.
Supplier-retailer relationships are similar in Aotearoa. The Commission’s 2022 market study revealed the sector was not working well for suppliers. Suppliers feared having their products removed from supermarket shelves if they didn’t comply with retailers’ requests or conditions. However, instead of making a range of targeted recommendations to address the problem, the Commission made just three and focused on one general fix: a mandatory grocery code of conduct.
The Commission introduced the Grocery Supply Code in September 2023.
Its purpose is to govern relationships between the major grocery retailers and their suppliers. It covers a range of products, including fresh produce, meat, dairy and pantry goods, such as eggs. If found guilty of breaching the code, a supermarket could face a maximum fine of $3 million, 3% turnover or the value of the commercial gain, whichever is higher.
But in his first annual grocery report (the grocery report) released in 2024, the Commissioner said the code just isn’t working as intended. The report highlighted ongoing concerns that the power imbalance between retailers and suppliers has not improved. Suppliers are still scared of supermarkets. As a result, the Commissioner has brought forward a review of the code.
Increasing transparency for consumers
The ACCC and the Commission each made a range of recommendations specifically targeted at increasing transparency for shoppers.
Unit pricing
The ACCC recommended existing unit pricing mandates be reformed.
Unit pricing makes it easier to compare the price of products based on what they cost per unit of measure, for example, dollars per 100g. By comparing unit prices, a shopper can work out the cheapest product regardless of size, brand or advertised special discounts.
Unit pricing has been mandatory in Australia for around 16 years now, and the Australian government is preparing to consult on a review of the code. The ACCC said it supports changes that ensure pricing is legible, prominent and consistent.
At the time of the Commission’s 2022 market study, unit pricing was not mandatory in Aotearoa.
The Commission recommended the introduction of mandatory unit pricing, and it became mandatory under the Fair Trading Act from August 2024. We’re continuing to monitor whether supermarkets are playing ball with the new law.
Pricing in general
The ACCC made a range of recommendations that would require supermarkets to publish pricing information.
Supermarkets should be required to publish minimum information requirements for discount price promotions. Discount price promotions involve a price being marked down as discounted or lowered from another price. This means supermarkets would need to publish the percentage discount, the price the item was discounted from, the new unit price and the old unit price, among other things.
Supermarkets should be required to publish notifications when package size changes occur. This would let consumers know when shrink- or skimpflation has affected products.
Supermarkets should be required to publish the value information of loyalty programmes to make those programmes more transparent. This would mean supermarkets would have to provide customers with loyalty summaries, explaining the monetary value of points and benefits earned and redeemed, as well as how much money the customer has spent.
The Commission made less targeted recommendations:
The major grocery retailers should ensure their pricing and promotional practices are simple and easy to understand.
The major grocery retailers should cooperate with price comparison services.
Despite these recommendations, the Commissioner said in a media release that pricing errors are likely to be costing shoppers millions of dollars each year. We think current developments in this space rely heavily on consumers to report errors, even though it’s the Commission’s, not customers’, job to monitor the sector.
Developments include Commission expectations that retailers review and promote refund policies.
We continue to find evidence that dodgy pricing and misleading specials are pervasive in our supermarkets. Our complaints to the Commission led to criminal charges being filed against Woolworths New Zealand, Pak’nSave Silverdale and Pak’nSave Mill Street for inaccurate pricing and misleading specials that may have breached the Fair Trading Act.
During a cost-of-living crisis, notifying consumers about shrinkflation would allow them to make more informed purchasing decisions and save money.
Loyalty programmes
The ACCC recommended that targeted reviews of the value and impact of Coles’ and Woolworths’ loyalty programmes take place three years after the release of its report. The report found a range of concerning developments in the loyalty programme space, such as the use of member-only pricing and increasingly sophisticated use of consumer data.
While it said regulatory intervention wasn’t yet needed, a dedicated review could:
consider the impacts of Coles’ and Woolworths’ loyalty programmes from a competition and consumer perspective
assess whether further measures are needed, including around the use of consumer data.
Loyalty programmes in Aotearoa are similar to those in Australia. Woolworths New Zealand’s Everyday Rewards programme is based on that of Woolworths Australia. But our investigations into loyalty programmes and pricing have revealed they offer little value.
At New World, swiping your Club Card would only save you $8.22 on average a week, while Woolworths’ Everyday Rewards would save you only $1.54.
However, the Commission did not recommend a review as the ACCC did. Instead, it recommended more transparency in the detail major grocery retailers provide about loyalty programmes and data collection and use practices. An in-depth review of programmes and their value could provide massive benefits for consumers in Aotearoa, enabling them to choose a loyalty programme that best suits their needs, or avoid them altogether.
Other recommendations
The ACCC recommended state governments support community-owned supermarkets. This recommendation acknowledges how difficult it is to operate a grocery business in remote and rural areas of Australia, as well as the difficulties faced by consumers in these areas. Often, remote and rural areas have limited choice when it comes to grocery suppliers. Creating an avenue for government funding could enable rural consumers to have greater and more equitable access to groceries.
But it’s the same in Aotearoa, where rural consumers are more likely to pay more for the same groceries and have less choice at the supermarket.
The ACCC said “governments of all levels should consider ways to support community-owned and community-run stores in limited choice areas (particularly very remote areas), to benefit consumers in places where competition is limited due to geographic factors.”
A similar initiative in Aotearoa could encourage independent operators to set up stores in more remote areas or help bolster existing stores.
The ACCC also recommended measures to strengthen complaints mechanisms for consumers in remote areas.
The Commission heard from rural communities throughout its consultation on its 2022 market study but made no targeted recommendations.
More must be done
ACCC deputy chair Mick Keogh said even though there’s no silver bullet to improve competition and the consumer’s experience, the organisation’s recommendations can make a difference.
“We are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector.”
Three years on from the release of our own Commission’s market study findings, the government has accepted 12 out of 14 of its recommendations, and implemented most. A range of changes have been made, including:
passing the Grocery Industry Competition Act 2023, which enables the Commission to regulate the sector
passing the Commerce (Grocery Sector Covenants) Amendment Act 2022, which prohibits anticompetitive land covenants
introducing mandatory unit pricing
appointing a grocery commissioner
passing the Grocery Supply Code
creating a grocery industry dispute resolution scheme.
Despite these changes, New Zealand consumers aren’t feeling any relief at the checkout, and we’re yet to see any meaningful improvements for shoppers. The Commission’s first annual grocery report, a review of the sector following the market study, validated consumer’s concerns. It revealed that the grocery sector has seen no meaningful improvement and our major supermarkets continue to control 82% of the market.
“We are at a crucial point where more must be done to tackle the structural and systemic issues in our supermarket sector. Consumers are facing persistently high prices, and the ACCC report shows that, without additional regulation, a third entrant in the grocery sector is not the silver bullet it is often presented as,” says Consumer NZ chief executive Jon Duffy.
Send us your examples
We urge stronger regulation and enforcement to address ongoing concerns around supermarket pricing and market power in Aotearoa. Any potential third entrant will take time to gain meaningful ground in the sector, if any. In the meantime, send us your examples of dodgy specials, misleading prices and shrinkflation.
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