On 21 November 2022, Minister of Commerce and Consumer Affairs David Clark announced the introduction of the Grocery Industry Competition Bill 2022 (Bill) which is expected to have its first reading in Parliament soon.
Background to the Bill
The Bill emerged as a response to the New Zealand Commerce Commission (NZCC) final report on its market study into the retail grocery sector earlier this year, which found that the sector was not functioning for consumers and was dominated by Foodstuffs North Island Limited, Foodstuffs South Island Limited (Foodstuffs), and Woolworths New Zealand Limited (Woolworths) that operate as a duopoly. The Bill aims to improve competition and efficiency in the industry to deliver better outcomes for consumers and businesses. To achieve this, it intends to open access to the market for competitors, allow more open negotiations between retailers and suppliers, more closely regulate the industry and provide for dispute resolution.
Changes proposed in the Bill
The Bill introduces several changes to the grocery industry which will largely be overseen by the NZCC. Some of the major changes include:
- A grocery supply code which would apply to regulated grocery retailers (initially Foodstuffs and Woolworths).
- Requirements to facilitate commercial agreements for the wholesale supply of groceries between regulated grocery retailers and wholesale customer.
- Penalties allowing for enforcement of the Bill. The maximum possible for a ‘Tier 1’ contravention being $500,000 for an individual or the greatest of $10M, 3 times the value of any commercial gain resulting from the contravention or 10% of the turnover of the person that is liable to pay the penalty and all its interconnected bodies corporate (if any) in each accounting period in which the contravention occurred.
- Mechanisms for dispute resolution for suppliers and wholesale customers.
- The creation of a Grocery Commissioner within the Commerce Commission.
- Amendments to the Fair-Trading Act 1986 to cover grocery-related contracts.
The Grocery Industry Competition Bill will be introduced under urgency and will be open to feedback for four months through the Select Committee process, with a view for it being in effect in mid-2023.
Overview of outcomes of the grocery market study
In addition to the Bill, there have been some other notable outcomes from the market study.
- The Commerce (Grocery Sector Covenants) Amendment Act 2022 came into force on the 29 June 2022, prohibiting restrictive and exclusive covenants over land and leases for grocery stores.
- Public consultation on the Grocery Supply Code closed on the 10 August 2022 and will be implemented through regulations under the Bill once it passes.
- Work continues to examine other structural options to improve competition, such as requiring major grocery retailers to divest some stores or retail banners.
Links
Grocery Industry Competition Bill
Another step towards improved supermarket competition | Beehive.govt.nz
Market study into supermarkets | Ministry of Business, Innovation & Employment (mbie.govt.nz)