Supermarket chains got 'big fright' from report into sector

Source: 1News

The Commerce Commission's report into the supermarket sector does not go far enough, economic and political commentator Bernard Hickey says.

It announced a suite of recommendations on Tuesday to improve competition in the sector.

Currently, Foodstuffs and Woolworths have a combined 90 per cent share of the market for Kiwis' main food shop.

Last year Kiwis spent more than $22 billion at supermarkets and grocery stores — more money than was earned from dairy exports.

READ MORE: Supermarket sector competition 'not working well for consumers'

New Zealand has the fifth most expensive groceries in the OECD.

The Commission found competitors wanting to enter the market face significant challenges, starting with accessing land.

File picture.

It recommended making more land available for new grocery stores, new planning laws, banning land covenants and exclusivity clauses, improving access to the wholesale market, requiring major retailers to fairly consider requests to supply competitors, and monitoring the likes of "best price" clauses and exclusive supply agreements.

The Commission also wants to see retailers ensure promotional and pricing practices, and terms and conditions of loyalty programmes, are easy to understand.

Hickey appeared on Breakfast in the wake of the report and commentary on his website The Kākā, where he said the Commission had shied away from slicing up duopolies into wholesale and retail arms.

"No big surgery here, no attempt to carve up the two duopolies," he told Breakfast.

"Really it's a case of direction to duopolies to go away and work harder ... We'll see whether that works.

"To be fair that big surgery would be really hard – it's a major operation to untangle all of those agreements … I can see why the Commerce Commission was reluctant to go down that track, but still our supermarkets are making $430 million a year in excess profits. That is money that is not in the pockets of consumers who are really struggling at the moment with high fuel prices, the rise in food prices … that's more than a $1 million a day that our supermarkets are overcharging us for the goods that we need to live."

Hickey said the duopoly had avoided regulation, diverted, deflected and denied for a long time.

It is good, however, there is going to be a grocery regulator and "that in three years time if we get them back in to the doctor's surgery and they haven't slimmed down and started being nice to people, then they're going to bring out the scalpel.

"The Government's still holding the threat of a carve up or bringing in a third competitor … that the Government could try to use as a stick to try and get them to be competitive."

Hickey felt the "big two supermarkets got a big fright" with the report.

He said people spending $2,3,400 to get what they need every week" was a "constant reminder that every week a $1 million in surplus profit is going into the pockets of supermarket owners … That's a reminder those companies need to be careful or they're going to do themselves out of a market position."