The Commerce Commission of New Zealand has released a report indicating that the grocery sector has not seen any meaningful improvement in competition.
Grocery Commissioner Pierre van Heerden said supermarket margins have increased, profits have stayed strong, and the two leading operators, Foodstuffs and Woolworths, have maintained their dominance.
“We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers,” he said.
He said competitive markets should ideally constrain or even decrease margin growth, but the information provided to the commission did not indicate such a limitation.
“The information provided to the Commission didn’t indicate that these margins were being constrained. This is a red flag for the state of competition in the grocery industry in New Zealand,” Van Heerden added.
“In contrast to the supermarkets’ claims, the Commission’s analysis shows that the retail prices of the major grocery brands have been increasing faster than the prices the major supermarkets pay to their suppliers.”
The Commission is now considering stronger enforcement actions, would use its powers more forcefully to drive change, and seek additional powers when necessary. It was reflecting on implementing rules that could impose fines of up to $10 million for breaches, as well as making greater use of the Fair Trading Act.
“This is a $25 billion sector—roughly the size of New Zealand’s tourism and dairy sales combined—so it’s crucial that we get this market working effectively.”
Last month, Pierre van Heerden threw criticism on misleading or inaccurate pricing practices in major supermarkets, saying Kiwis were losing tens of millions yearly due to the pricing errors.
He also mentioned that the Grocery Supply Code was not working as intended.