30 May 2022

Bold steps by Government to address competition issues in the supermarket sector

The Government has announced it will be progressing a mandatory wholesale access regime.

We welcome today’s announcement from the Minister of Commerce and Consumer Affairs David Clark, indicating the Government will go beyond the Commerce Commission’s recommendations in the final report on the grocery sector.

“It is beyond debate that competition is not working well for consumers in the grocery sector,” said Consumer NZ chief executive Jon Duffy.

“The Government’s response demonstrates a commitment to fixing the underlying issues that are producing lacklustre competition and high profits and contributing to high prices at the checkout.

“We are pleased the Minister has recognised the importance of this issue to New Zealanders and rejected two of the commission’s key recommendations, which would have seen New Zealand shoppers putting up with the status quo for at least the next three years.”

The Government has rejected a recommendation that the duopoly be left to consider requests for wholesale supply from other retailers in good faith.

Instead, the Government has announced it will be progressing a mandatory wholesale access regime.

“We need to create an even playing field for new and emerging grocery retailers,” Duffy said.

“The voluntary regime recommended by the commission would have left competitors at the mercy of the very companies they’d be competing with. Putting a regulatory regime in place will ensure that new and emerging retailers must be treated fairly.”

The Government has also rejected the recommendation to wait three years before reviewing the state of competition in the grocery sector following the implementation of the commission’s recommendations. The state of competition will instead be reviewed annually by a grocery sector regulator.

“This is a practical and necessary step for the Government to take. Three years is just too long for New Zealanders to have to tolerate the status quo,” Duffy said.

The Government has also committed to further analysis to promote effective competition. This could include retail divestment, which could involve supermarkets being forced to sell stores to make way for competitors.

Earlier this month, Consumer NZ launched a petition calling for Minister Clark to go further than the Commerce Commission’s recommendations and look into regulating access to wholesale supply or setting up a state-owned wholesaler. More than 78,000 New Zealanders signed.

“We want to thank every New Zealander who signed the petition,” Duffy said.

“There is power in numbers, and this shows, that when consumers let their voices be heard, change can happen. Our research has indicated there has been a marked decline in trust towards the supermarkets. With the cost-of-living sky rocketing, New Zealanders deserve to get a fair price at the checkout.”

Member comments

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Alec S.
03 Jul 2022
Unit prices

I have noticed in our New World Supermarket that unit prices have become very small at the bottom right hand side of the price label and printed lightly with what seems to be a dot printer, making it quite difficult to read especially if it is on the bottom shelf. I have got new prescription glasses and have to just about lie on the floor to read the unit price. I am now 70 and am finding it more difficult to bend down to read them, let alone lie on the floor!!
Secondly I have noticed that very often the unit price is missing altogether on price labels where there is a 'Club Deal' (whatever that is) or 'Super Saver'. (I have photos of some of these labels.) Isn't it compulsory to have a unit price on ALL grocery items?

Doug M.
10 Jun 2022
Supermarket excess profits?

I'm still a bit puzzled by Consumer saying the Supermarkets are making $1m per day in 'excess profits'.

Is Consumer saying that each supermarket is making more this amount per day? This can't be right especially when you look at some of the smaller supermarkets around the country.

Is Consumer saying that in total per day the total number of Supermarkets are making this profit? This seems wrong as there are about 3,500 supermarkets in NZ and hence this comes out to an excess profit of only $286 per day per supermarket. This doesn't sound right.

So I'm still confused about where this $1m comes from and how it was derived.

My other concern is about general supermarket profitability. If some of the supermarkets in smaller centres cannot maintain a reasonable profit (ie the owners make a decent living and pay the their staff more than the minimum wage) they will close and consumers will have to traffic further to get their supplies. Then the consumers will then pay more in fuel costs to buy the supplies than the so called inflated prices of the goods. Either way the consumer pays.

Nicholas G.
13 Jun 2022
Duopoly=Super Profits=$1 Million a day

The Supermarkets in NZ are duopolists as such they a market failure because they are forcing the market to best suit them. They are using their market power by forcing higher prices on consumers and lower prices on their suppliers creating super profits. This only benefits the supermarket owners and their shareholders. What is amazing is that this was allowed to occur and is allowed to continue.

B A S.
04 Jun 2022
Governments and free enterprise

don't mix. These supermarkets have shareholders who expect a decent return and who can blame them? Some overseas supermarket owners have looked at our tiny market and declined. The Warehouse dipped their toes into the grocery market when they opened a supermarket in Sylvia Park; lasted 6 months or so. In the long run consumers hold the power if they choose their purchases wisely and cut down on the junk food items.

Nicholas G.
13 Jun 2022
Market Failures cannot be supported

The Supermarkets in NZ are duopolists as such they a market failure because they are forcing the market to best suit them. They are using their market power by forcing higher prices on consumers and lower prices on their suppliers creating super profits. This only benefits the supermarket owners and their shareholders. What is amazing is that this was allowed to occur and is allowed to continue.

Dwayne B.
31 May 2022
Hopefully this entices Coles and Aldi to join the fray.

If we could get just one more large retailer into NZ, it would make all the difference.

Once these reforms are implemented, it might finally happen.

Penny C.
30 May 2022
Explore other ways of bringing prices down.

Perhaps it is also apt time to review what goods incur GST. Common consumer items, i.e. milk, bread, butter, etc - should be exempted from GST.

Cut the middleman, do supermarkets directly go to the source, i.e. farmers?

More accessible markets where farmers or communities can sell commonly produced goods, e.g. vegetables, fruits, honey, eggs, etc.

Dwayne B.
31 May 2022
No.

Good taxation policy can never allow what you suggest.
Any exemptions to GST introduce market distortions and also involve government picking winners. That only ever leads to poor outcomes.

Arif A.
30 May 2022
Capitalism=Competition

We are capitalist country. It's extraordinary that it took so long to fit the Grocery sector into core basic of Capitalism, that is competition for the benefit of both, community and businesses.

It seems like Kiwis are too good and trust Corporate world, who's fundamental existence is to make profit at its highest possible level. Any profit making organisation cannot return the trust in it's purity.

Jane S
30 May 2022
Such faith in the theory of competition

One can only hope, with little of it, that such belief in the theoretical powers of competition will be rewarded. I remember when electricity provision was split up by the government on the basis that multiple suppliers would result in lowered prices through competition. Yeah right.

Dwayne B.
31 May 2022
Not an apt comparison.

There is no true competition in the electricity market, as prices reflect the cost of generation on a regional basis and those prices are regulated.

The wholesale access scheme for the supermarket industry proposed by the government is entirely different and there is no reason why it should not succeed in substantially enhancing competition in the sector.

Karen H.
30 May 2022
Supermarket and commerce commission.

I'm so Happy I signed the partition and our voices have been heard.
Well done consumer, you are the best.
Lets hope we get some competition sooner rather than later.