Major supermarkets will be incentivised, then forced, to "play fair" so that dairies and smaller grocery chains can sell at competitive prices, the Government confirmed on Wednesday.
Supermarkets will need to give competitors fair access to groceries and will be forced to sell at set prices if they fail to open up a wholesale market adequately.
Consumer Affairs Minister David Clark said that supermarkets' behind-the-scenes wholesale operations will be required to open up to "would-be competitors".
The Commerce Commission found supermarkets earn $1 million a day in excess profits because of a lack of competition. (Source: 1News)
"No ifs or buts, greater competition, a wider range and cheaper products will be provided to New Zealanders through these changes," he said.
“Our plan will give a leg up to the likes of smaller retailers and new market entrants. It means other retailers will now be able to source and sell a wider range of groceries at better prices."
The PM and the Commerce Minister said they expected it to drop prices for shoppers. (Source: 1News)
The Government already announced in May it was planning to force supermarkets to allow rival retailers access to groceries at reasonable conditions, going further after a recommendation from the Commerce Commission for supermarkets to voluntarily consider wholesale requests.
Confirming the move on Wednesday, Clark said the existing supermarket duopoly will be required to negotiate wholesale offerings to their competitors "on commercial terms".
"However, if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices.
“The grocery sector needs to change, so that competing retailers – whether they are independent dairies, smaller chains, or a new entrant – can offer a wider selection of products at competitive prices," Clark said.
The draft law is expected to be completed by the end of the year. It still needs to go through Parliament.
National's Andrew Bayly said that while he was generally supportive of the supermarket reform proposal, "this is not going bring down prices of groceries for mum and dad".
"This is going to take a year to come into place, we don't know the detail, but we're broadly supportive."
In June, Woolworths NZ and Foodstuffs both announced that wholesale grocery services were being set up.
Woolworths New Zealand’s Spencer Sonn said on Wednesday that they have "nearly signed up our first multi-store wholesale customer which we hope to confirm soon".
"A backstop should be there to use if the industry doesn’t take active steps to make wholesale happen. It’s our view that we are best to get on and do it, and that’s what we’re doing.
“Future wholesale supply will only be successful if suppliers give their support around price, range and volumes available to wholesale customers.
“The inflation that we are seeing now is being driven by high commodity prices for locally grown and produced goods, significantly increased local and global freight costs, labour shortages, unpredictable weather and global inflationary pressures which many other markets much larger than ours are experiencing too.
"Unnecessary and overly complex regulation will not solve those problems, and in fact, could make the cost of living crisis worse.”
A Foodstuffs spokesperson told 1News the supermarket giant has been "publicly reporting on our progress to implement the Commerce Commission’s recommendations to improve competition in the grocery sector".
That included its Code of Conduct and working to simplify pricing and promotions on its dashboards.
"There isn’t another market we’re aware of where access to wholesale groceries is regulated – so it’s useful to today see the principles of the proposed regulatory backstop to provide some clarity. We will now take time to review this in detail and continue working with MBIE."
The spokesperson said the grocery company has been working since May to find a "commercial solution to provide wholesale access to retailers who aren’t members of our co-operative".
However, it said wholesaling groceries to non-members "isn’t as simple as opening the doors of our distribution centres and letting trucks roll up".
"Our co-op’s operations have been built over 100 years to serve our members’ 521 locally owned and operated stores. Providing retail-ready wholesale groceries to non-members means setting up a new service for retailers who are not integrated into our co-operatives."
In May, the Government confirmed its plans to crackdown on the supermarket duopoly, with a promise to force supermarkets to allow rival retailers access to groceries at reasonable conditions. It came after the Commerce Commission's March recommendations to improve competition in the supermarket sector.
One suggestion from the commission was to encourage supermarkets to voluntarily consider all requests for wholesale supply of goods. The Government wanted that to be made mandatory.
In July, the Government said it was appointing a watchdog to "hold the sector to account and ramp up competition".
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