The Commerce Commission will file civil proceedings against Foodstuffs South Island Ltd (FSSI), alleging it implemented and enforced a widespread restriction on independently owned PAK’nSAVE stores discounting selected products.
Commerce Commission chair Dr John Small said that the conduct alleged occurred deprived Kiwis of the best possible prices when shopping at their local supermarket and limits competition.
“Under the franchise model, individual South Island PAK’nSAVE supermarkets are supposed to be able to compete on pricing, discounts and promotions," said Dr Small.
“Instead, we allege FSSI applied guidelines and rules that stopped these independently owned and operated supermarkets from offering certain discounts unless they received prior approval.”
The Commerce Commission will argue that the conduct constitutes resale price maintenance, which is illegal under section 37 of the Commerce Act. Resale price maintenance prevents retailers from setting prices below certain levels, limiting competition and potentially leading to higher prices.
Specifically, the Commission will allege that FSSI guidelines and rules prevented three forms of discounting.
FSSI centrally set a ‘Super Deal’ promotion price for a product and prohibited franchisees from discounting below this price, unless the PAK’nSAVE obtained prior approval.
Franchisees were also prohibited from discounting any other product in the same category below the 'Super Deal' promotional price.
FSSI also set an ‘Every Day Low Price’ centrally, primarily for ‘shelf staple’ goods, and prohibited PAK’nSAVEs from applying further discounts on these products unless prior approval was given.
“We will argue the alleged anti-competitive conduct was widespread, with FSSI’s guidelines covering all South Island PAKn’SAVE franchisees for a period of at least several years."
The Commission continues to detect anti-competitive behaviour by the country’s major supermarkets. Given that proceedings are due to be filed, the Commission cannot make further comment at this time.
