Major grocery shake-up to drive cheaper prices

• Supermarkets required to provide their competitors fair access to their products on wholesale terms
• Changes will incentivise supermarkets to share and justify pricing and product ranges for wholesale sales
• If they fail to offer a fair deal new regulation will require supermarkets to offer certain wholesale products at terms, including price and range, determined by regulator

An unprecedented shake-up of the grocery sector will see the supermarket duopoly forced to sell groceries to their competitors at set prices and terms if they fail to adequately wholesale market voluntarily, the Government has announced today.

“No ifs or buts, greater competition, a wider range and cheaper products will be provided to New Zealanders through these changes,” Commerce and Consumer Affairs Minister, David Clark said.

“The Commerce Commission found New Zealand supermarkets earn $1 million a day in excess profits because of a lack of competition. These regulatory measures will deliver a more competitive wholesale grocery market. 

“With New Zealanders experiencing pain at the checkout this is one action we are taking to tackle the causes of cost of living increases.

“Ultimately we have decided to take stronger action than the Commerce Commission suggested. They said any wholesale regime should be voluntary. We’re not confident that will deliver the results consumers deserve.

“Alongside their retail stores, supermarkets have behind the scenes wholesale operations. The changes announced today will ultimately require the duopoly to open these up to would-be competitors.

“Our plan will give a leg up to the likes of smaller retailers and new market entrants. It means other retailers will now be able to source and sell a wider range of groceries at better prices.

“Under these changes the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms. However if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices. 

“Ultimately if these interventions don’t deliver a fair deal new regulations can be utilised to require the major retailers to provide wholesale supply at certain terms, including price and range.

“The new system will incentivise the major supermarkets to play fair. But if they don’t the Commission will be able to use powerful new tools to make them do so.

"Supermarkets are well advised to lock in good-faith wholesale arrangements on their own terms, or we will have no problem stepping in to make it happen.

“The grocery sector needs to change, so that competing retailers – whether they are independent dairies, smaller chains, or a new entrant – can offer a wider selection of products at competitive prices.

“Alongside these improvements to wholesale access, the Government is also building flexibility into its approach to a collective bargaining exemption for grocery suppliers. Many suppliers, particularly small ones, are unable to effectively negotiate terms of supply with the major grocery retailers on their own. This exemption will allow greater scope for them to do this collectively, helping to address imbalances in bargaining power.

“The Government is working to address the systemic lack of grocery competition in New Zealand. Today’s announcement is just the latest in our plan to deliver a fairer deal at the checkout for Kiwis,” David Clark said.