Competition market study into supermarkets

The Government response follows the Commerce Commission’s market study into the retail grocery sector. The market study found that competition is not currently working well for consumers in this sector, and that improved competition would place stronger pressures on retailers to offer New Zealand consumers better prices, quality, range and service in their supermarket shop.

The Commission made 14 recommendations aimed at improving competition in the New Zealand retail grocery sector.

Read the final retail grocery market study report(external link) — Commerce Commission

Government response to market study

The Government accepted 12 of the Commission’s 14 recommendations. Most of these have now been implemented.

Passing the Grocery Industry Competition Act

The Government passed the Grocery Industry Competition Act. The purpose of the Act is to improve competition in the grocery industry for the long-term benefit of consumers.

The Grocery Industry Competition Act:

• establishes a Grocery Commissioner – a new grocery sector regulatory function in the Commerce Commission to provide oversight and ongoing review of the sector
• regulates wholesale supply, including establishing a regulatory backstop, to help ensure a more competitive wholesale market
• implements supplier-focused protections such as prohibiting the use of unfair contract terms, allowing opportunities for collective bargaining, and providing for a Grocery Supply Code of Conduct
• provides for a dispute resolution scheme for suppliers and wholesale customers of the major grocery retailers.

Read the Act(external link) — legislation.govt.nz

Passing the Commerce (Grocery Sector Covenants) Amendment Act

The Government has passed amendments to the Commerce Act to prohibit restrictive and exclusive covenants over land and leases to address a key competition issue in this sector.

Read the Act(external link) — legislation.govt.nz

Introduced standards for mandatory unit pricing

The Government has passed regulations requiring certain retailers to display per unit pricing of grocery products in a clear and consistent way. This should help consumers more easily compare items on the shelf through, for example, the display of costs per kilogram or litre of product.

Read the regulations(external link) - legislation.govt.nz

MBIE held initial consultation on unit pricing in mid-2022

MBIE consulted on the draft regulations between April and May 2023

Introduced a Grocery Supply Code of Conduct

The Government has implemented a mandatory Code of Conduct setting minimum conduct for how the main grocery retailers deal with their suppliers. This should improve the trading environment for suppliers, which is likely to have flow-on benefits for consumers.

Read the regulations(external link) – legislation.govt.nz

MBIE held initial consultation on the Code in mid 2022

MBIE consulted on a draft of the Code between June and July 2023

Grocery Dispute Resolution Scheme

On 11 October 2023, the Minister of Commerce and Consumer Affairs decided to approve the New Zealand Dispute Resolution Centre (NZDRC) to provide a dispute resolution scheme for the grocery industry (Scheme) under the Grocery Industry Competition Act 2023.

The Scheme will have jurisdiction to settle disputes up to $5 million between:

• Regulated Grocery Retailers and their Suppliers in relation to the Grocery Supply Code 2023 that comes into full force on 28 March 2024, or
• Regulated Grocery Retailers and other grocery retailers (Wholesale Customers) in relation to the wholesale supply of groceries by Regulated Grocery Retailers to Wholesale Customers under Part 3 of the Grocery Industry Competition Act.

All Regulated Grocery Retailers (currently Foodstuffs North Island Limited, Foodstuffs South Island Limited and Woolworths New Zealand Limited) are required to comply with the Scheme rules.

Before NZDRC can issue the Scheme rules, the rules will need to be approved by the Minister of Commerce and Consumer Affairs after they have been consulted on with the persons, or the representatives of the persons, that will be substantially affected by the Scheme.

NZDRC prepared the draft Grocery Industry Dispute Resolution Scheme Rules (Draft Rules) and commenced consultation on the Draft Rules on Friday, 1 December 2023. The deadline for written submissions on the Draft Rules to be received by NZDRC has been extended by 2 weeks from 2.00pm on Friday, 26 January 2024 to 2.00pm on Friday, 9 February 2024.

The Draft Rules, consultation paper and submission form template are available on the New Zealand Dispute Resolution Centre website:

Grocery Industry Dispute Resolution Scheme consultation(external link) — New Zealand Dispute Resolution Centre

Other work

Government examined other options to improve competition, including requiring major grocery retailers to divest some of their stores or retail banners.

The Government has decided not to progress work on divestment at this stage. More information on this decision is provided in the further information section below.

Minister's announcements to date

Clearer pricing at supermarkets imminent(external link) — Beehive.govt.nz

Scrutiny of the grocery sector focuses on delivering lower costs for households(external link) — Beehive.govt.nz

New measures will help shoppers make informed decisions at the checkout(external link) — Beehive.govt.nz

Another step towards improved supermarket competition(external link) — Beehive.govt.nz

Major grocery shake-up to drive cheaper prices(external link) — Beehive.govt.nz

New supermarket watchdog latest action to give Kiwis fairer deal(external link) — Beehive.govt.nz

New law paves way for greater supermarket competition(external link) — Beehive.govt.nz

Commerce Commission empowered to crackdown on covenants(external link) — Beehive.govt.nz

Government acts on supermarket duopoly(external link) — Beehive.govt.nz

Govt helps supermarket shoppers get a fair deal(external link) — Beehive.govt.nz

Commerce (Grocery Sector Covenants) Amendment Bill(external link) — New Zealand Parliament

Further information