Grocery Industry Competition Bill

Wednesday, December 21, 2022

The Grocery Industry Competition Bill (Bill) was introduced under urgency on 21 November 2022. The Bill seeks to regulate actors in the retail grocery industry, with the aim of improving efficiency and increasing the level of competition between grocery retailers.

The Bill has been referred to the Economic Development, Science and Innovation Committee and public submissions on the Bill close on 17 January 2023, with the Committee due to report back by 23 March 2023. The Bill is expected to be passed in mid-2023.

How did the Bill come about?

The Bill follows a report by the Commerce Commission into the grocery sector. The report found that the retail grocery market in New Zealand operates as a duopoly, which has had adverse effects on consumers, suppliers, and smaller grocery retailers.

Key aspects of the Bill

The Bill provides for a new wholesale regulatory regime. The regime seeks to mitigate difficulties that new entrants to the market currently face in getting access to groceries for retail sale.

The new regulatory regime would have two parts and include:

  • Regulatory requirements for major grocery retailers to facilitate the commercial sale of groceries at the wholesale level; and
     
  • A set of backstop regulations that the Commerce Commission may impose if the initial regulatory requirements do not create a workably competitive market.

The Bill also includes the following measures:

  • It provides for the establishment of a grocery supply code which major grocery retailers would be bound by. The purpose of this code will be to promote fair conduct and practices between regulated retailers and their suppliers, and to ensure transparency and certainty about the terms of their supply agreements.
     
  • Some of the existing protections in the Fair Trading Act 1986 against unfair contract terms will be extended to cover a wider range of grocery contracts. Contracts with an annual value threshold of up to $1m will be covered by these protections.
     
  • Provisions to allow certain suppliers to collectively negotiate terms and conditions of supply with major grocery retailers by exempting those suppliers from prohibitions in Part 2 of the Commerce Act 1986.
     
  • Appointment of a Grocery Commissioner to provide general oversight of the grocery industry, monitor and report on the industry’s performance, and ensure compliance with the regulatory regime provided for in the Bill. The Bill provides the Commerce Commission with powers that enable the Grocery Commissioner to carry out this role, including the power to gather information, issue corrective notices and require warnings to be disclosed, apply to the court for pecuniary penalties, compensatory orders, orders to vary or cancel contracts, and injunctions.
     
  • A dispute resolution scheme to provide for independent resolution of disputes of a certain nature that a grocery supplier or a wholesaler customer may have with a major grocery retailer.

What this could mean for the grocery sector

These protections aim to apply competitive pressure on retailers to resist any upward pressure on prices from suppliers. The government hopes that the Bill will constrain the ability of major retailers to pass on price increases to consumers without the risk of losing some of their competitive advantage.

Special thanks to summer clerk Jack Douglas for preparing this article. For more information about how this Bill may affect you, contact a member of our Competition & Antitrust law team.

 

Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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