[ FGC ]
GETTING SERIOUS IN A PIVOTAL YEAR
Katherine Rich Chief Executive NZ Food & Grocery Council www.fgc.org.nz
food& grocery COUNCIL NEW ZEALAND
If anyone had any doubts about how serious the Government is on reform in the grocery industry they only need look at the budget for setting up the new grocery sector regulator inside the Commerce Commission – a cool $4.8 million. And that’s just for the set-up over the next year to enable the Commission to prepare for the new role. There’s no word on annual budget, but if the regulator is to do its job you can imagine it will be sizeable, assuming it will consist of a dedicated team as opposed to one “regulator”. The Commission has already said it’s recruiting a market performance team to support responses to the grocery market study (as well as future market studies), and that international expertise could be sought. The Commissioner is being established to keep an eye on how the Government’s reforms are being implemented and will provide annual state-ofcompetition reviews, ensuring changes such as the introduction of unit pricing are implemented. They will also mediate disputes between suppliers and retailers, and shoppers and retailers, and will be able to issue warnings and fine supermarkets. Consumer Affairs Minister David Clark described it simply as “a referee of the sector, keeping the supermarket duopoly honest and blowing the whistle where it suspects there is a problem.”
“THE GOVERNMENT WANTS TO INTRODUCE LEGISLATION ESTABLISHING THE COMMISSIONER’S OFFICE LATER THIS YEAR” 30
FMCG BUSINESS - AUGUST 2022
Basing it inside the Commerce Commission, who recommended it in its grocery market study report, will certainly give it more grunt. It will, for example, be able to call on the Commission’s expertise around economic and competition regulation, fair trading, and consumer protection, as well as what it learnt during the study about the grocery industry. The Government wants to introduce legislation establishing the Commissioner’s office later this year, with appointments early next year. The Food & Grocery Council wants it to be a matter of priority. The Ministry of Business, Innovation and Employment, which will be doing the hiring, says though the market in New Zealand for people with the right skills and experience is small, it’s confident of finding the right person, and I’m sure they will. The announcement of the Commissioner was made alongside the release of a draft document on the new mandatory Code of Conduct for supermarkets. This is something dear to the hearts of suppliers, who have been pushing for it since 2010 to protect them from the market power of the supermarket duopoly that has resulted in a lack of competition, a lack of dispute resolution processes, and a lack of choice and competitive prices for consumers due to uncompetitive behaviour, as well as restrictive practices (especially in retailer/supplier relationships), and unclear obligations of good faith. The lack of competition has enabled the duopoly to push excess costs, risks, and uncertainty onto suppliers, with fears of delisting if they do not agree to their terms. The document is a step closer to safeguards to protect suppliers from that power. For example, it canvasses a range of options to reduce the risk of supermarkets using the threat of “delisting” products in an underhand way to squeeze suppliers, or from leaning on their suppliers to pay for the cost of promotions that may not be worthwhile for the supplier. The document was developed with input from the major retailers, FGC, and consumer groups. The deadline for submissions is August 10 and I encourage everyone in the industry to have their say. These announcements follow great progress on other recommendations of the Commission. The Government has already banned restrictive land covenants and lease agreements imposed by supermarkets, and expects to finalise new wholesale regulation rules in October, when Minister Clark also expects to report on options for forcing Countdown and Foodstuffs to sell some of their stores to make way for a third operator, if needed. This is a pivotal year in food and grocery.