New Zealand’s Commerce Commission is seeking to limit the payments that supermarkets can charge suppliers to improve competition and bring more benefits to consumers.

The agency has announced some proposed changes to the draft Grocery Supply Code, which was introduced under the Grocery Industry Competition Act to ensure negotiations between major supermarkets and their suppliers are fair and transparent.

One of the latest proposals is to restrict the range of situations where retailers can charge suppliers. Retailers would no longer be able to charge suppliers for stocking the shelves or for groceries that become unfit for sale while under the retailer’s effective control, as well as other ordinary retailing activities such as setting up displays. 

With this change, the Code would also require supermarkets to keep records of certain activities charged to suppliers, including promotions.

According to Grocery Commissioner Pierre van Heerden, New Zealand’s grocery sector is dominated by three major players with combined purchases of over $16 billion and 82 per cent of market share. One of those players is Australia’s Woolworths, the other two being geographic co-operatives under Foodstuffs.

“My concern is that the power imbalance between the major supermarkets and small suppliers creates a reluctance among suppliers to push back on supermarket demands or behaviour for fear of damaging relationships or losing access to supermarket shelves,” van Heerden said.

“We believe that setting these rules in place will help mitigate the power imbalance and allow suppliers to be more confident market participants so they can innovate and invest in better products and more choice for consumers,” he added.

In addition, the commission suggested adding a requirement that if a retailer has bought groceries at a promotional price for a sale period and then sells that product at a higher price, they have to pay the difference to the supplier. 

The agency will continue to receive submissions on the draft Supply Code before issuing its final report by the end of September.