Watchdog wants more rules for big supermarket players

Otago Daily Times

2 days ago

Change is on the cards for the supermarket sector, as the Commerce Commission looks at ways to improve competition.
It has released a draft report into the review of the Grocery Supply Code and a preliminary view into its wholesale market inquiry.
The commission identified two commercial behaviours which it said reinforced the power of the major supermarkets - Foodstuffs and Woolworths - and the country's biggest grocery suppliers.
Grocery Commissioner Pierre van Heerden said a key problem was the power imbalance between major retailers and small suppliers, meaning those suppliers were reluctant to push back and insist on better prices.
He said small suppliers feared damaging relationships or losing access to shelves.
"This leads to smaller suppliers taking on costs and risks that are best managed by the retailer."
The commission has also taken issue with promotional payments in wholesale markets, where small retailers cannot compete for deals against big players.
"The prices the major supermarkets pay suppliers are subsidised by around $5 billion in rebates, discounts, and promotional payments," van Heerden said. "Competing retailers can't negotiate similar levels of support due to their weaker buying power."
The commission recommended four changes to the Grocery Supply Code, including adding a requirement that if a retailer bought groceries at a discount for a sale period, and then sold the product at a higher price after the sale period, they had to pay the difference to the supplier.
It would also prohibit retaliation against suppliers exercising their rights under the code.
In the wholesale market inquiry, the commission recommended two changes, including major supermarkets expanding their wholesale product range and putting in systems to pass promotional funding through to their wholesale customers, so that other retailers could access cheaper prices.
It also recommended suppliers reduce their reliance on promotional funding, or allocate the funding to more retailers.
The commission has sought submissions on the draft Grocery Supply Code and would consider those before a final report due by the end of September.
It said changes proposed for the wholesale market would be voluntary for now, but if there was no "meaningful progress" in a year, it would decide whether it needed to change regulations.
It said a final report on its wholesale supply inquiry would likely be completed in 2026. Supermarkets respond
In a statement, Foodstuffs North Island said it would review the commission's draft report and recommendations, though it maintained its support for the status quo.
"We support the existing intent of the code and the dispute resolution process," a Foodstuffs North Island spokesperson said.
"We are open to working with the commission on ideas to lift awareness and understanding of the code, particularly among smaller suppliers who may need additional support."
Foodstuffs said regularly surveyed its more than 2000 suppliers "to ensure we are working as partners, listening, and constantly improving".
"Any supplier who has an issue should raise it through the appropriate channel - either with us directly or through the Commerce Commission."
Woolworths New Zealand interim managing director Pieter de Wet said the company had positive relationships with its 1400 local and international suppliers.
"We support the Grocery Supply Code because we feel that consistent rules hold everyone to the same high standard and help businesses of all sizes to grow and succeed," de Wet said in a statement.
"We're working closely with suppliers and wholesale customers to further improve and develop our wholesale business."
Woolworths New Zealand would work constructively with the commission through the submission process.