The Commerce Commission has filed proceedings in the Wellington High Court against Foodstuffs North Island, alleging that anti-competitive land covenants were lodged by the supermarket operator with the purpose of blocking competitors from opening rival supermarkets at particular sites and developing existing ones at several locations across the lower North Island.
The Commission and the defendants have entered into a settlement to resolve the proceedings on terms acceptable to both parties. The High Court will determine any orders to be made in relation to Foodstuffs North Island in due course.
Commission Chair, Dr John Small, said that while historical, the Commission considers the conduct to be serious enough to warrant proceedings under the Commerce Act.
“This is a vital $25 billion sector, which impacts every Kiwi consumer," said Dr Small.
"The covenants were of long duration, and we allege were lodged with the purpose of hindering competitors in local towns and suburbs where Kiwi consumers buy their groceries.”
The proceedings follow an investigation into the conduct that came to light during the Commission’s market study into the grocery sector, completed in March 2022. The study identified that the use of covenants on land, or in leases by the major retailers was limiting the number of sites available to competitors.
Dr Small acknowledged that in August 2021, Foodstuffs North Island committed to stop using restrictive land covenants and exclusivity provisions in leases and in June 2021 had already started a process to identify and remove any such clauses in existing tenancy contracts. The Commerce (Grocery Sector Covenants) Amendment Act 2022 has also prohibited and unenforceable certain grocery-related covenants. This legislation was a recommendation from the Commission’s market study into the grocery sector.
Dr Small said this case against Foodstuffs North Island is important in demonstrating that the Commission will continue to pursue companies in any industry who use land covenants to stop rivals entering local markets.
“Land covenants have the potential to harm competition by raising barriers to entry or expansion in a market, making it harder for rival businesses to compete effectively and gain scale. Ultimately, the loser here is the Kiwi consumer who is deprived of the benefits that come from a more competitive market,” he said.
“I encourage all companies who have previously lodged land covenants that restrict the use of sites by their competitors to consider whether they comply with the Commerce Act.”
As the proceedings are before the Court, the Commerce Commission cannot comment further.
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