New Law Paves Way for Greater Competition

Minister of Commerce and Consumer Affairs, Dr David Clark has noted that legislation that bans major supermarkets from blocking their competitors’ access to land to set up new stores paves the way for greater competition in the sector.

The new law is the first in a suite of measures the Government is taking to deliver better outcomes at the checkout following a Commerce Commission investigation found competition in the retail grocery sector is not working.

“We have officially put an end to the anti-competitive land wars which have been silently hampering competition in the grocery sector for years,” said Clark.

“This law will stop the major supermarkets from dictating the terms of leases to block opposition retailers from getting a foothold in an area. This is great news for the would-be competitors of the established supermarkets – especially those who’ve found it difficult in the past to find suitable sites to set up new stores.”

The Commerce (Grocery Sector Covenants) Amendment Bill amends the Commerce Act 1986, banning restrictive covenants on land, and exclusive covenants on leases. It also makes existing covenants unenforceable.

“Limiting the supermarket options on offer for consumers severely restricts their ability to shop around for a better range of products, and of course, a better price,” he continued.

“We introduced this legislation under urgency on Budget night, because it directly tackles one of the major issues with competition in the grocery market that acts as a barrier to fairer prices.

“Budget 2022 delivered a cost-of-living payment for about 2.1 million Kiwis to help with the impact of rising prices and fixing our supermarket sector is another action we can take. The Commerce Commission found the supermarket duopoly was earning excess profits of $1 million a day. Government and Kiwis have been very clear that this is not sustainable.

“We’re talking about excess money kiwis are having to fork out every single day. Therefore, Government has taken swift action.”

Clark added that the Bill also enhances the Commission’s information gathering powers. As a result, it will have legal mandate to demand documents relating to contracts, arrangements and covenants to ensure they’re complying with the law. I’d expect this authority to be used proactively, and not just where the Commission suspects something might be awry.

“There is more to come to deliver greater competition. We continue to work at pace on a regulatory backstop to ensure there is a wholesale access regime in place to support competitors entering the market,” concluded Clark.

“And we’re also moving fast on the mandatory code of conduct, which will be heading out for public consultation in the coming weeks and the unit pricing scheme which is already out for feedback.”