The Commerce Commission has commenced a market study into factors that may affect competition in the grocery sector following publication of terms of reference for the study by the Minister of Commerce and Consumer Affairs.
“The price and quality of groceries have an impact on all of us. Groceries are a major expense for households, with more than $22 billion spent at New Zealand supermarkets and grocery stores in the past year”, Commission Chair Anna Rawlings said.
“New Zealand has one of the most concentrated retail grocery sectors in the world. If retail competition is working, our study would expect to see grocery retailers competing to win customers based on factors such as price, quality, choice, and service. Our study provides an opportunity to consider whether competition in the sector is working for the benefit of New Zealand consumers, and if not, how it could be improved.”
The Commission will release a preliminary issues paper and engage with, and send information requests to, a range of stakeholders, before Christmas. It will undertake further information gathering and engagement with stakeholders, including with consumers, commencing early next year.
The Commission expects to release its draft report for consultation around July 2021 and final report in November 2021.
A process paper and updated guidelines that describe the purpose of a market study and the Commission’s approach to market studies are available on the study’s dedicated webpage (www.comcom.govt.nz/groceries)
This is the Commission’s second market study after completing one into the retail fuel market in December 2019.
The Commission or the Minister of Commerce and Consumer Affairs may initiate a market study where they consider it is in the public interest to do so. The party that initiates the study must publish terms of reference that identify the goods or services to be studied.
The Minister of Commerce and Consumer Affairs announced the initiation of a market study into the grocery sector on 17 November and a notice was published in the Gazette, formally directing the Commission to carry out the study. The Commission has now opened the study.
What is a market study?
A market study, referred to as a ‘competition study’ in Part 3A of the Commerce Act, is a study into the factors affecting competition for particular goods or services, to find out how well competition is working and whether it could be improved.
By gathering and analysing information on a market, we can identify whether there are features preventing it from working well, as well as considering how they might be improved.
Outcomes of our work may range from a ‘clean bill of health’ for the sector to recommendations for changes to enhance market performance. The Commission’s recommendations are non-binding, but the Government must respond to any recommendations within a reasonable period.
Why is competition important?
When markets work well, businesses compete by providing consumers with products and services at prices and quality levels they hope will be more attractive than their rivals. In a competitive market, businesses are incentivised to innovate, and new competitors may be attracted to enter the market, putting pressure on incumbents.