HomeNEWSGovernment introduces regulation to “fix” supermarket duopoly

Government introduces regulation to “fix” supermarket duopoly

The government has announced new regulations for the supermarket sector, after research reveals that the country’s largest chains earn $1 million a day.

Minister of Commerce and Consumer Affairs, David Clark, announced on May 30 that new regulations will be in place because it is “very clear that the supermarket industry doesn’t work”.

“It’s not competitive and shoppers aren’t getting a fair deal. The duopoly needs to change, and we are preparing the necessary legislation to do that,” says Clark.

The government’s decision to regulate the sector comes after a Commerce Commission market study showed that supermarkets earn $1 million a day in excess profits. Following the report, the Commerce Commission have made 14 recommendations, of which the government has accepted 12, including a code of conduct to establish an industry regulator, and ensuring loyalty programmes are easy to understand and transparent.

Other regulations include the duopoly of supermarkets to open their wholesale arms to “would-be competitors” at a fair price, a compulsory unit pricing on grocery products and annual reviews.

Clark adds that a Bill is currently with the select committee regarding the controversial act of the supermarket chains using leases to block competition from setting up in certain suburbs and shopping centres.

He adds that he has spoken to the two supermarket chains to make the regulations “clear”, and what is expected from them. He also adds that the price rollbacks that both companies introduced earlier in the year “doesn’t fix the systemic problem at large – which is a lack of genuine competition in the sector”.

Read more: Seventy-five percent of SMEs concerned about rising inflation levels.

“Given the pressure New Zealanders are under due to global inflation and cost of living increases, we can’t afford to wait three years. Budget 2022 delivered a cost-of-living payment for about 2.1 million Kiwis to help with the impact of rising prices and fixing our supermarket sector is another action the Government can take,” says Clark.

The Commerce Commission market report reveals the leading supermarket chains in NZ earn $1 million a day.

The government expects the regulations to be finalised by the end of year, with Clark adding that they are “not afraid to unlock the stockroom door to ensure a competitive market”.

New Zealand’s Food and Grocery Council’s Chief Executive, Katherine Rich says they welcome the government’s response.

“It’s a major task unravelling the harm caused by New Zealand’s duopoly market structure, but announcements today make the direction clear. Consumers, suppliers, and other retailers will welcome these plans,” says Rich.

She says the governments regulations shine a light on the need for genuine competition, improvement in retailer behaviour and will make a difference to the grocery market, where New Zealand is the only country in the world with a “distilled” duopoly.

“The wholesale market for groceries is broken, and competitive access to a full range of products is important support healthy competitions.”

Spencer Sonn, Managing Director at Woolworths New Zealand says that Countdown is in support of the Commerce Commission’s recommendations.

“While the government’s response goes further than these, we accept that change is needed, and we’re committed to playing a positive role in a competitive grocery market for Kiwis,” says Sonn.

Regarding the government’s urging of supermarket chains to open their wholesale arms, Sonn says that Woolworths do not have the capability to do so yet, but is in the process of seeing how they can achieve this.

“We’re committed to working with the government to meet their expectations and with our supply partners who will play an important part in this.”

Chris Quin, Managing Director at Foodstuffs says that they will co-operatively work with the government regarding the regulations, such as working towards “a well-designed, mandatory code”.

“We are up for change, supportive of the timeframe of an annual review revised today, and for being held accountable and look forward to operating in this new environment,” she says.

“We support the government’s request that there be an active wholesale market in New Zealand, and the request for us to participate in that market.”

The following day after the government’s announcement regarding the regulation, Deputy Prime Minister Grant Robertson revealed German supermarket giant, Aldi is considering entering the country.

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Bernadette is a content writer across SCG Business titles, The Register and Idealog. To get in touch with her, email bernadette.basagre@scg.net.nz