The Government is ordering the country's competition regulator to probe the supermarket industry to ensure they are not unfairly squeezing Kiwis at the checkouts.
Minister of Commerce and Consumer Affairs David Clark this morning announced he has ordered the Commerce Commission to conduct a market study on supermarkets.
The investigation is similar to the one the commission did on the petrol market last year - that investigation led to a more transparent pricing strategy, which required fuel prices to be displayed on forecourt price boards.
After the market study was announced, petrol companies almost immediately lowered the price at the pump.
Clark hopes the probe into supermarkets will have the same effect.
"New Zealand has one of the most concentrated retail grocery markets in the world and there are indicators that competition in the sector has weakened over time," he said.
"Groceries are one of our most regular expenses, so we want to make sure pricing is fair."
There are two dominant supermarket chains in New Zealand: Australian-owned Progressive and Foodstuffs.
Progressive is the owner of Countdown while Foodstuffs owns New World, Pak'n Save and the smaller Four Square.
What the Commerce Commission will look into
• The structure of the grocery industry at the wholesale and retail levels
• The nature of competition at the wholesale and retail levels of the grocery industry
• The pricing practices of the major grocery retailers
• The grocery procurement practices of the major grocery retailers
• The price, quality, product range and service offerings for retail customers
Probe to take a year
David Clark said that the average Kiwi household spent roughly 17% of their weekly expenses on food and this has been increasing each year.
The study will take a year to complete and the Commerce Commission will report back to Clark on November 23 in 2021.
The aim of the market study is to look into how competitive the supermarket space is in New Zealand.
The outcome of this could lead to recommendations which could ensure the weekly shop is cheaper, Clark said.
Clark said that some of the big supermarket chains have said there is already a healthy degree of competition in the sector – "we want to test whether that is the case".
"If issues affecting competition are identified in the study into supermarkets, the Government will consider the necessary changes to bring about better outcomes for consumers."
Clark said that some of the big supermarket chains have said there is already a healthy degree of competition in the sector – "we want to test whether that is the case".
"If issues affecting competition are identified in the study into supermarkets, the Government will consider the necessary changes to bring about better outcomes for consumers."
The minister noted that Labour had promised the supermarket study during the election and the Government was now "cracking on".
The market study will, according to Clark, give the Government the "power to act".
"This study could make a real difference for Kiwis."
Clark said the study would be used to help regulate the sector.
Countdown happy to cooperate
"We work hard every day to make food as affordable as we can for our customers," a spokesperson said.
"The New Zealand grocery market is intensely competitive and this can be seen by the huge array of choice that is available for customers - including supermarkets, specialty stores, fruit and vege shops, butchers, meal subscription services and more.
"We welcome the opportunity to demonstrate this in an open and transparent way, and will cooperate fully with the Commerce Commission."
Consumer NZ welcomes inquiry
Consumer NZ chief executive Jon Duffy welcomed the inquiry, saying it's good news for Kiwi shoppers.
"New Zealand has one of the most concentrated supermarket industries in the world, dominated by two players.
"When you've got a market like this, there's a big risk that consumers will end up paying higher prices because the usual competitive pressures don't apply."
In September this year, Consumer NZ made a complaint to the Commerce Commission asking it to use its market study powers to investigate levels of competition in the supermarket industry. They also asked them to investigate supermarket price promotions.
Despite the high degree of concentration, the supermarket industry hasn't been subject to any significant scrutiny from regulators, Duffy said.
"Supermarkets have a huge influence on the food supply chain, from the farm gate to the dinner table.
"Their practices not only affect what choices are available to consumers -– and which brands end up on shop shelves - but also what we pay at the checkout.
"Consumers have the right to know whether this market power is being misused."
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Comments
Only another year of paying higher prices before the report is completed ... another year for a couple of MPs to read it ... another year for them to commission overcharging "consultants" to come up with some possible solutions ... another year to put make it public and bring in any regulations that may, or may not, see any price changes to your weekly grocery bill.
So let's just in 5 years time you might be paying an additional 50% for your weekly grocery shop due to "factors we have no control over" IF you believe the overpaid CEO's and directors of the main grocery suppliers who give themselves big fat bonuses because they made over their projected budgets .....
Merry Christmas everyone!!!
so... what you're saying is that because of the time this will take they shouldn't even bother? You sound like the National Party dealing with the housing crisis.
Do you work for the National Association Grocers?
Do you work for the ardern fan club?.
Hypocrites, the lot of them!
They just shafted the small independents by forcing them to close during lockdown and now they say the big chains have too much power and no competition.
On yer bike Clark.
You socialists are starting to annoy me.
It's time you woke up and accepted that your philosophy of State interference has failed, it's failed all around the world.
If you can't run your business and plan for contingencies in a free and open market then you deserve to go under. The businessman's failure to plan and the resulting crisis is not the taxpayers problem.
In the current pandemic the Govt quite rightly and with the support of the taxpayer put in place social programmes to assist businesses through the worst of the lockdowns. If despite this assistance they still failed then tough! That's the reality. Stop whining and whinging like a little school kids about the unfairness of it all.
From my own anecdotal observations and the impact on my household budget there is no question that the big chains are exploiting their duopoly and ripping the public off with unwarranted price increases. An open and transparent inquiry into these practices is long overdue and should be welcomed by all.
You liberals are starting to annoy me.
It's time you woke up and accepted this govt won't do what they say they will, Weag group recommendations, no to sick leave provisions, haven't seen the results of their last "investigation" into fuel prices and likely won't see this one either.
About time someone questions why Foodstuffs can charge up to 80% higher prices for the same items at the Port Chalmers Four Square compared to Pak'n Save South Dunedin which is only 15km away. And Four Square's marketing slogan... looking after the locals! Yeah, right.
This from a govt that refuses to action the recommendations of the WEAG group it set up, refuses to help those at the bottom of the ladder, refuses to action the doubling of sick leave provisions, so what's to say they will do the same here with this "investigation".
Response to nivaman comment at 4pm on 17 Nov.:
I didn't think you were a liberal.
Your posts clearly demonstrate that you do not believe in the right of the individual to pursue their freedoms and accept responsibility for the consequence of the same. You clearly believe everyone should do what you think is right and when it goes wrong you expect the State to bail you out. I'm proud to be called a Liberal and I'm ecstatic to know that I annoy you by speaking my truth.
Response to "Ird" comment at 7:07pm on 17 Nov
Read for comprehension "You liberals are starting to annoy me", where did I say I was a liberal?, your posts clearly demonstrate that you believe everyone must bow down to your ideals, any deviation is not allowed, freedom of discussion is verboten. Oh and no, you don't "annoy" me, I don't give two hoots what you think.