New Zealand’s Commerce Commission is looking into concerns about the fees supermarket chains owned by Woolworths and Foodstuffs charge their suppliers and the potential negative impact of this practice.
Supermarkets currently charge suppliers for rebates, discounts, and other payments related to shelf restocking, promotional support, aisle cleaning, and other in-store services.
The Grocery Industry Competition Act specifies what supermarkets can charge suppliers for and includes rules that they treat suppliers in good faith.
The Commission has identified over 50 different types of supplier payments that account for around $6 billion paid by suppliers to the major supermarkets annually.
The regulator believed these fees might negatively impact new and existing competitors in the grocery market.
“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 the major supermarkets to use their market power to obtain prices from suppliers that other retailers can’t,” said grocery commissioner Pierre van Heerden.
“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 large and small retailers pay for groceries and its impact on competition.
“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 continued.
The Commission will focus on investigations and enforcement work that puts these payments under the microscope, rather 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,” van Heerden added.
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