Who said what about the ComCom grocery report? All the responses in one handy place

by | Mar 9, 2022 | News, Opinion

The highly anticipated release of the Market Study into the Grocery Sector by the Commerce Commission has met with a flurry of responses – one jubilant, one relieved, several disgusted and the majority only partially satisfied with the outcome. And there’s more to come – including from the feisty Tex Edwards of Northelia group, who told The Feed he was on page 419 of the 609-page report and still thinking.

“Given what we’ve already submitted it’s probably no secret how we’re feeling.”

Tex Edwards

Highly disappointed, would be our guess. Northelia along with others wanted the 80% duopoly dismantled, including structural separation of wholesale and retail arms.

That’s not one of the 12 recommendations. While acknowledging that competition is not working and the industry is making excess profits of $430m/year, the ComCom stops short of the bust-up we’ve seen in the telco sector. “The intensity of competition between the major grocery retailers who dominate the market – Woolworths NZ and Foodstuffs – is muted and competitors wanting to enter or expand face significant challenges,” Commerce Commission chairwoman Anna Rawlings says.

Commerce and Consumer Affairs Minister David Clark says the government will immediately progress work to address the Commission’s findings. “This includes exploring how a code of conduct between major retailers and suppliers could be developed and looking at the role a dedicated regulator for the grocery sector could play. The commission’s findings indicate that restrictive covenants over land are a major barrier to supermarkets accessing new sites, so I want to ban these covenants being used to stop competition.

“The report sets out a clear justification for change in the grocery market. The status quo will not deliver fairer prices for consumers and a better deal for producers and wholesalers, and I hope the sector will constructively engage in the changes that need to be made,” says Clark.


What it said in brief

The ComCom summarised the key recommendations thusly:

  • freeing up land for supermarket development, through changes to planning laws and prohibiting the use of restrictive covenants on land and exclusivity covenants in leases
  • the major grocery retailers offering wholesale supply to other grocery retailers on a voluntary basis, subject to some limited regulatory measures
  • addressing imbalances in bargaining power between the major grocery retailers and many of their suppliers by introducing a mandatory grocery code of conduct, considering enabling collective bargaining by some suppliers, and strengthening the Fair Trading Act’s business-to-business unfair contract terms provisions
  • helping consumers make more informed purchasing decisions and enhancing competition at the retail level, by introducing mandatory unit pricing, as well as asking the major retailers to ensure that their pricing and promotional practices, and the terms and conditions relating to their loyalty programmes, are simple and easy to understand.


As a haiku it would be:

The way to improve competition

Is to lower the conditions for entry

By freeing land, setting rules.


And what do the rest say?


The ‘slightly disappointeds’

Ernie Newman: cautiously optimistic

The Herald’s Hamish Rutherford reckons the report is a far cry from the sweeping measures mooted last year, which argued that there was a structural issue. “Supermarket owners across New Zealand are likely to be breathing a little easier today after their corporate bosses convinced the Commerce Commission that the sector is not delivering the kind of super-profits the regulator initially thought.”

Ernie Newman agrees. A consultant and the point-man for telco users in the break-up of Telecom, Newman wrote in Stuff that the report “won’t break the duopoly, nor immediately open the door for another supermarket chain. It won’t address the current explosion in pricing that is driven by Covid – there simply is no avoiding the pass-through of massive escalations of input costs like fuel and supply chain constraints. It won’t immediately guarantee better wholesale terms for the smaller retailers.”

But Newman sees positives: “The endemic abuse of the suppliers’ massive powers through bullying behaviour may in future end up with an official reprimand, or an instruction to desist, all exposed on the Stuff home page. That’s huge.”

And there’s “…the confident hope that if things haven’t changed to benefit consumers by 2025 the commission will be back with a huge mandate and a greatly improved understanding of the industry gathered through the new grocery regulator … Much will depend on the mindset of the duopolists. If they read the tone of the report, take aboard the public support that the commission’s process has enjoyed, and make it the driver of significant cultural change, everybody in the chain will win.”

Also in the slightly ‘I’m-disappointed-with-you’ club is Consumer NZ saying it’s disappointed the recommendations don’t go further.

It has been calling for 10 fixes to the grocery sector, including a mandatory code of conduct, a supermarket commissioner, a ban on restrictive land covenants and mandatory unit pricing – all of which the Commerce Commission has recommended.

But the report hasn’t recommended regulation of supermarket price displays, promotions and loyalty schemes and there is nothing that will require supermarkets to supply other retailers with groceries at competitive wholesale prices. Instead, the recommendations rely on supermarkets voluntarily changing their pricing and loyalty scheme practices and to only consider requests for wholesale supply from other retailers in good faith.

“We are concerned the recommendations rely on the supermarkets doing the right thing.”


The ‘pretty happies’

But for Eric Crampton from The NZ Initiative, the report gets it right. “The Commerce Commission’s report strikes at the root. The report has other recommendations, but the only recommendations that matter for ensuring competition are removing the barriers to entry.”

And what are those barriers? Crampton reckons it’s all about restrictive zoning by councils. “The Commission recommended making it harder for councils to block new supermarkets. Retail grocery could be considered ‘permitted’ or ‘controlled’ rather than ‘discretionary’, easing the consenting hurdles. It also recommended that the proposed Natural and Built Environments Act stop councils from blocking new retail developments because of potential adverse effects on existing developments. I’d have gone further and recommended criminalising that kind of consenting practice. It too easily borders on corrupt protection of existing landowners.

“The set of measures would go a long way to freeing up land for new grocery entry. If ample amounts of land were zoned to allow grocery retail, restrictive covenants on particular sites simply would not matter.”

Food&Grocery’s Katherine Rich: got everything they wanted

A beaming Katherine Rich from the Food & Grocery Council told NBR the report is a victory and said her organisation had “got everything we asked for and more”, but noted there was still some pessimism among suppliers, believing that the recommendations should have been stronger.

“I’ve had some members say ‘I thought there would’ve been more to it’  but, you know, the description of a code and a grocery industry regulator is just one sentence (in the report) but behind that is a very significant body of work and the impact for suppliers will be very positive.”


The very disappointeds

One of those may well have been Sarah Hedger, of Nelson cereal maker Yum Granola. She told Stuff she was left “disappointed and angry” – there wasn’t enough left to shake up the industry.

The Commerce Commission had missed a chance to even the playing field by not breaking up the wholesale and retail arms of the bis supermarket companies, she said. The suggested code of conduct was something “they should have done decades ago”, and would only help if it was well implemented and “policed properly”.

As it stood, small suppliers and the consumers were unlikely to see any major change from the recommendations, she said.

“You’re not given, essentially, a fair opportunity.”

​​ Sarah Balle, founder of start-up online supermarket Supie is gutted. She told NBR the report contained “weak recommendations” and was “incredibly disappointing” for both suppliers and consumers. 

Supie’s Sarah Balle: changes not enough

Concessions on land covenants (supermarkets placing restrictive covenants on land and exclusivity covenants in leases that prevent rival supermarkets from developing stores) was coming anyhow, as part of a small number of concessions the duopoly made last year.

A new entrant had to still find land and build a supermarket, with all the processes that entailed, so it was a slow solution, if one at all. 

“Regardless of covenants, we also know the duopoly land bank and have sites that they haven’t yet built on, like Highland Park where it is just a bare site, so removing the land covenant is one step in the right direction but it will not save consumers money at the checkout tomorrow.” 

Te Ao Maori News featured National Māori Authority chair Matthew Tukaki, who steered much of the Māori korero into the commission’s Inquiry, calling it “weak”.

“What an absolute pack of bureaucrats and idiots who wouldn’t know how to manage a drunk man’s birthday in a brewery,” he told Te Ao Tapatahi.

Matthew Tukaki: ComCom couldn’t organise a piss-up in a brewery

He sees an opportunity for iwi to come in as a third supermarket operator to break up the existing duopoly.

“The engagement with te ao Māori was both insufficient and, quite frankly, lacking. The fact that we were only able to hui with them in the months before December [2021], and yet Māori are a $60 billion dollar plus economy. We account for 50% of the fishing quota in this country, we account for 40%, 30%, 20% and 10% of all beef, dairy, lamb and kiwi fruit. We provide the logistics and supply chain warehousing workforce. And these two major players, Foodstuffs and the Australian-owned Countdown, have been getting away with absolute hōhā for years.

And a terrific piece of rage reporting here by independent commentator Bernard Hickey.  “Reading about the bullying, the rent-seeking and the use of laws designed to protect the environment to instead smear a juicy layer of super-profit into the cost of everything we buy in supermarkets is a lot like finding out how the mortgage-fueled housing market works. Watching an official inquiry conclude not much can or should be done to rectify this was also eerily familiar.

Accidentally on purpose, Aotearoa-NZ has found itself held hostage by uncompetitive markets and dominant market players for two of the basics of life: food and shelter. A series of accidents of political history tied to a naive three-decade-long assumption that free markets would always provide the basics and the luxuries of life both efficiently and fairly has put us in the position where our housing is the most expensive in the world and our groceries are the fifth most expensive in the world.

It’s a tragedy that profits on $23b worth of sales each year are around double what they would be if the market was properly efficient and competitive. Our house prices are around double what they would be if we had an elastic and competitive market for serviced land and transport for housing. Our rents are as much as a third higher than what they should be relative to incomes if our market was competitive.”

Bernard appeared with John Cambell on TVOne’s Breakfast.

Stuff’s Tom Puller-Straker has a similar take: it’s an opportunity lost!

The ‘we can’t believe we just got away with that’

Foodstuffs North Island was the first of the giants to respond. “We acknowledge that competition can work better for New Zealand customers. As a result, we accept that the sector does need to change and we are committed to our role in doing that.

“We need time to now consider the final report in detail, but from our initial review we are committed to working with the Government in supporting the implementation of the recommendations in the final report.

“We’ve been fully engaged in the market study process from the outset over 15 months ago, we’ve listened, and we’ve committed to an action plan that will meaningfully improve outcomes for customers and address the proven issues raised through the market study.

“Our action plan includes a commitment to simplifying our pricing and promotional practices, working with suppliers and the Government to develop a compulsory code of conduct, and ending the use of restrictive land covenants and exclusivity provisions in leases.

“Our action plan will remove the genuine barriers to market entry that are within our control, and deliver better competition and value for New Zealanders. We welcome the fact that the commitments in our action plan are reflected in the Commission’s final report.

“We will now work with the Government on implementation of the recommendations set out in the final report today.”

This story was updated 11:52am March 10


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