Commerce Commission sues Foodstuffs South Island over franchisee discounting ban

From political slogan to court filing

Grocery competition has been a talking point in New Zealand for years. On 5 August 2026 it became a live legal fight. The Commerce Commission filed court proceedings against Foodstuffs South Island (FSSI), alleging the co-operative ran rules that stopped its Pak’nSave franchisees from discounting selected products without prior approval.

The mechanism the Commission describes is specific. FSSI set a ‘super deal’ promotional price and barred franchisees from going below it without sign-off. It also stopped stores discounting any other product in the same category below that price, and set an ‘every day low price’ on staples that Pak’nSaves again couldn’t mark down without approval.

That is the textbook definition of resale price maintenance, a breach of the Commerce Act. It happens when a supplier or franchisor sets a floor under the prices a downstream party can charge, removing the competition consumers are supposed to benefit from. Commission chair Dr John Small said the alleged conduct “deprives Kiwis of the best possible prices when shopping at their local supermarket and limits competition,” and that the guidelines covered all South Island Pak’nSave franchisees “for a period of at least several years.”

The independence pitch under strain

Here is why this is more than a regulatory footnote. Pak’nSave stores are marketed as independently owned and operated, with store-versus-store competition built into the brand’s value proposition. If the Commission wins, it establishes that FSSI was in practice running a managed pricing arrangement across all its South Island stores, hollowing out the very competition the franchise structure is meant to deliver.

Put plainly, the case asks whether South Island shoppers paid more at Pak’nSave than they needed to because the stores were prevented from undercutting each other. In August 2024, Consumer NZ’s head of research Gemma Rasmussen warned that limited choice can leave shoppers “vulnerable to the pricing a supermarket chooses to set,” adding that in a duopoly holding most of the market “we need to keep a close eye at further grabs for power.” That warning now has a court filing attached to it.

Concentration unchanged, margins up

The backdrop makes the timing awkward for Foodstuffs. The Commission’s 2025 Annual Grocery Report, published in June 2026, found the regulated grocery retailers still hold an 82% national market share, unchanged from prior years, with Pak’nSave on 25%. Crucially, the report noted FSSI’s margins increased over the period. This is the same entity now accused of suppressing in-store price competition.

The report also put numbers on the leverage in play. Rebates, discounts and payments between the big retailers and suppliers were worth roughly $6 billion in FY25, about 26% of combined sales revenue. That is the scale of money moving through relationships the regulator has been trying to prise open.

The ‘better behaved’ Foodstuffs is now in the dock

What makes this notable is which entity is being sued. FSSI has long been seen as the more cooperative half of Foodstuffs. In September 2025, Newsroom reported a Commission supplier survey found 35% of suppliers had a negative experience with Foodstuffs North Island, against 17% for the South Island co-operative. Grocery competition advocate Ernie Newman said at the time that FSSI and Woolworths were “much easier to deal with,” reserving his criticism for the North Island entity’s “aggression.”

So the friendlier, better-behaved Foodstuffs is the one facing a resale price maintenance claim. That suggests the Commission’s enforcement is broadening, and that a cooperative posture toward regulators did not stop the alleged conduct occurring. Foodstuffs North Island, meanwhile, is separately facing court action over alleged cartel conduct.

Two fronts, and a test of the whole framework

The resale price maintenance proceedings sit under the Commerce Act. Separately, the Commission opened a formal investigation into FSSI’s wholesale obligations in November 2024 under the Grocery Industry Competition Act, which remains open. FSSI is being pursued on two legal fronts at once.

The wholesale scheme was meant to open the market to smaller grocers. In 2024 the Grocery Commissioner’s first annual report found 54% of products offered at wholesale could be bought cheaper at retail, a damning sign the scheme was not working. Penalties under the supply code can reach the greater of $3 million, the value of any commercial gain, or 3% of revenue, and for an operator of FSSI’s scale the revenue figure is the binding one.

The real significance is precedent. If the Commission wins, it establishes that franchise-model pricing controls can be illegal, with implications for any sector where a head franchisor dictates promotional pricing. If it loses, or the case grinds on for years, it will raise hard questions about whether the competition tools built since 2022 have any practical force. For anyone operating inside a franchise model or a supply chain dominated by a handful of buyers, this is the case to watch.

Sources

• Commerce Commission takes Foodstuffs South Island to court alleging anti-competitive conduct (2026-08-05)
• 2025 Annual Grocery Report (2026-06-02)
• Foodstuffs’ regulatory hostility linked to market dominance – experts (2025-09-11)
• Supermarkets now a sitting duck for intervention (2024-09-05)
• Big supermarket revamp lays groundwork for postcode price wars (2024-08-07)
• Suppliers swamped with deals as supermarket grace period ends (2024-04-11)
• Commerce Commission investigating Foodstuffs South Island (2024-11-11)