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New Zealand plans regulation to boost supermarket competition

New Zealand plans regulation to boost supermarket competition
A customer pushes a cart to the parking area at a supermarket operated by The Warehouse Group Ltd. in Wellington, New Zealand, on Wednesday, March 25, 2020. New Zealand declared a state of national emergency, giving the government additional powers to enforce a nationwide lockdown initially in force for four weeks, that will see all schools and non-essential businesses close. Supermarkets, pharmacies and other essential services will remain open, though many are required to limit customers to one at a time. Photographer: Birgit Krippner/Bloomberg

The New Zealand government is preparing to regulate supermarkets and has told the two major players to take immediate steps to increase competition.

“The government has put supermarkets on notice, and the message is clear: change at pace to increase competition and be prepared for regulation,” Minister of Commerce and Consumer Affairs David Clark said on Monday in Wellington. “The supermarket industry doesn’t work. It’s not competitive and shoppers aren’t getting a fair deal. The duopoly needs to change, and we are preparing the necessary legislation to do that.”

New Zealand grocery prices are among the highest in the OECD, reflecting the fact that two companies – Foodstuffs New Zealand and the local unit of Australia’s Woolworths – form a duopoly with just a fringe of other rivals. Earlier this year, a report by fair trading watchdog the Commerce Commission said it was very difficult for other players to enter the market and provide the competition that could drive down prices.

The government is targeting the wholesale arms of the two big companies, arguing they should be accessible to smaller rivals and new entrants.

“If competitors don’t have proper access to wholesale goods, there’s no real incentive to enter the market,” said Clark. “We are calling on the duopoly to open these up to would-be competitors, at a fair price. If supermarkets do not strike good-faith wholesale deals with their competitors, our regulatory measures will make it happen for them.”

Earlier this month, the government introduced a law to stop existing operators from putting covenants over land in certain suburbs and shopping malls where rivals may seek to build.

Clark said today a new regulator will be established to provide annual state-of-competition reviews “to keep supermarkets honest” and to facilitate a resolution scheme to mediate disputes between suppliers and retailers.

The government is also looking at how to implement compulsory unit pricing on grocery products, which will give shoppers the ability to better compare products, and is getting ready to launch consultation on a code of conduct that retailers will have to adhere to, he said.

It is also undertaking further work around “requiring major grocery retailers to divest some of their stores or retail banners,” Clark said. “Obviously this is a longer term piece of work due to its complexity.” BM

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