Food and grocery manufacturers have welcomed the introduction of the Grocery Industry Competition Bill into Parliament this week, praising the speed with which it was drafted.
The bill follows a deep-dive report by the Commerce Commission into competitiveness in the nation’s grocery sector, which proposed multiple measures to encourage new players to enter the market and challenge the existing supermarket duopoly of Countdown and Foodstuffs.
“An expected enactment date in the middle of next year is earlier than many would have hoped for back in March when the Commerce Commission reported back with its recommendations from its Grocery Market Study,” said New Zealand Food & Grocery Council CEO Raewyn Bleakley.
A key feature of the legislation includes forcing wholesalers to supply competitors on commercial terms, which would make it easier for new chains to establish businesses in New Zealand – both local players and foreign chains, such as Aldi. In the past, large supermarkets have declined requests from some independent retailers seeking wholesale supply, thus protecting their own market share.
“We are aware steps are being taken now ahead of this bill being introduced and look forward to seeing this change as a result.” She said the message from the government in introducing the bill is that if the opening up of wholesale is not done voluntarily, a regulatory intervention will ensure it is.
New regulations will obligate wholesale suppliers on terms including price and range.
Bleakley said the bill will address “desperately needed changes in the grocery sector” and praised the government for moving so quickly following the Commerce Commission’s findings.
“This is a complex area and we welcome measures that will get more competition into the market for the benefit of consumers.
“There are two ways we’d like to see this happen: by another significant retailer entering the market and by a host of smaller ones able to compete more effectively with the big retailers.
“This is what we hope the proposals in this bill will achieve,” she said.
The bill will create the role of a grocery commissioner to oversee the implementation of the government’s industry reforms and make further policy recommendations if any barriers to competition are not removed.
The council is still awaiting further details of the proposed Code of Conduct for the industry.
“What we’ll be looking for in the detail of the bill is that it prevents retailers from using unfair negotiating power to force suppliers to accept unfavourable terms of supply that may involve them taking on costs and risks that are better addressed by the major grocery retailers, extends protections against the use of unfair contract terms, and enables certain suppliers to collectively negotiate terms and conditions of supply with the major retailers,” said Bleakley.
“Suppliers also welcome the bill’s proposal for an alternative dispute resolution scheme, which will provide independent, prompt, and cost-effective resolution of any dispute they may have with a major retailer. Importantly, this will be accessible to suppliers and wholesale customers, particularly smaller businesses.”
The date of the Grocery Industry Competition Bill first reading in Parliament has yet to be announced.
