The Commerce Commission has prioritised investigations into concerns about rebates, discounts, and other payments the major supermarkets charge suppliers, and the negative impact these practices have on new and existing competitors in the grocery market.
Grocery Commissioner Pierre van Heerden said that these payments add backroom complexity and reinforce the low levels of competition in the grocery market.
New and smaller entrants struggle to compete or grow, as this practice allows major supermarkets to use their market power to secure lower prices from suppliers that other retailers can’t.
We’re not suggesting that the major supermarkets shouldn’t be able to negotiate hard for competitive prices.
"This is about the difference between the prices that large and small retailers have to pay for groceries and the impact of that on competition," said van Heerden.
“While these payments aren’t unique to New Zealand’s grocery sector, they’re problematic because of our market structure, where a few big players hold most of the market and so can distort competition."
He added that resources were being focused on investigations and enforcement work that puts these payments under the microscope, and that this was a better and faster way to address the negative impact of some of these payments than additional regulation.
“Making sure these payments comply with grocery competition law will help support a more enabling environment for other competitors, and for suppliers to innovate and expand. The end goal we’re working towards is a grocery market that has more options, value, and choice for Kiwi households,” said van Heerden.
There are rules under the Grocery Industry Competition Act that specify what supermarkets can charge suppliers for and rules that they treat suppliers in good faith. The Act also prohibits conduct that would prevent wholesale customers from receiving the benefits of certain payment types.
The Commission has identified over 50 types of supplier payments totalling around NZD six billion paid by suppliers to the major supermarkets annually. These payments may be charged for shelf restocking, promotional support, aisle-cleaning and other in-store services.
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