The Government is “urgently pursuing” ways to introduce more competition into the supermarket sector and address high food prices.
In March a Commerce Commission report said a lack of competition in the New Zealand supermarket sector was creating higher prices than elsewhere in the world.
Foodstuffs and Woolworths run all of New Zealand’s large-scale supermarket brands and control 90% of food sales.
The report found they were earning $1 million a day in excess profits - double what the commission considered to be a normal rate of return.
The Commerce Commission made 14 recommendations to help improve competition in the supermarket sector.
Minister of Commerce and Consumer Affairs David Clark announced today the Government would be actioning all 14 of the report’s recommendations and speeding up the timeline to action them.
One of the recommendations was to review competition in three years.
In a statement, Clark said New Zealand couldn’t afford to wait three years and the issue of competition needs to be addressed now.
“Our supermarkets know they’re in the spotlight and we’ve recently seen some posturing around price rollbacks. However it doesn’t fix the systemic problem at large – which is a lack of genuine competition in the sector.”
“We are calling on the duopoly to open these up to would-be competitors, at a fair price. Do this knowing the Government is determined to get a regulatory backstop finalised by the end of the year.”
Clark said these changes would be introduced through the Grocery Industry Competition Bill, which he plans to introduce to Parliament later this year.
Other changes in this bill will be compulsory unit pricing. This means that alongside how much an item will cost you, it also tells you how much it costs by unit - this is usually weight.
Let’s say there are two boxes of cornflakes on the shelf, a 500g box and a 300g box. The big box costs $4.50 and the small box $3.
Unit pricing would also tell you how much the product is worth per 100g - in this case $1/ 100g for the 300g box and $0.90 / 100g for the 500g box.
This allows you to make more informed decisions on the value of something.
The proposed changes will also create a new code of conduct for supermarkets and an industry regulator role which Clark said will “keep pressure on the grocery sector, by providing annual state-of-competition reviews to keep supermarkets honest”.
Other Commerce Commission recommendations the Government has committed to implementing are making more land available for new grocery stores, new planning laws, the banning of land covenants and exclusivity clauses, improving access to the wholesale market, requiring major retailers to fairly consider requests to supply competitors, and monitoring the likes of "best price" clauses and exclusive supply agreements.
The Government has already introduced legislation to address supermarkets buying land and dictating leases that keep competition out.
At a post-cabinet press conference, deputy prime minister Grant Roberston said this legislation will stop the “anti-competitive land wars”.
“This practice leaves customers without choice, and sees suburbs and shopping centres with only one option. That limits the ability of consumers to shop around for a better range of products and, of course, a better price.”
The Government is also working on legislation which will require current supermarkets to sell some of their stores but Clark said this is more complicated and would take additional time.
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