A hospitality business found a supplier willing to deal directly. Foodstuffs North Island and its wholesale subsidiary Gilmours allegedly intervened to kill the arrangement, pressuring the supplier to re-route the trade back through their own distribution channel. The Commerce Commission says that amounts to market allocation, a form of cartel conduct, and has taken FSNI and Gilmours to court.
Now, as Newsroom reported this week, the Grocery Commissioner has piled on further allegations of contraventions alongside the existing legal action. The trial is not until February 2027. That is 20 months after proceedings were filed, and roughly five years after the original market study found the grocery sector was broken.
For any food service operator, restaurant owner, or institutional buyer who sources through Gilmours’ eight locations from Auckland to Wellington, this is personal. The allegation is that a direct procurement relationship was dismantled to protect a wholesale intermediary’s margin.
The numbers that damn the entire exercise
The Commerce Commission’s third Annual Grocery Report, published earlier this month, delivers the verdict the regulator clearly wishes it didn’t have to write. The duopoly’s combined retail market share sits at 82%, precisely where it was when the market study reported in 2022. In Auckland, regulated grocery retailers hold 71% of market share.
Margins and profitability have remained largely stable, the Commission found, noting these patterns are “not what we would expect in a market experiencing increasing competition.” Alice Hume, the Commission’s head of grocery, called the state of the sector “disappointing”.
The wholesale access regime, GICA’s centrepiece mechanism for enabling new entrants, has been a particular failure. Total wholesale sales under the regime reached just $22 million by August 2025. The three regulated grocery retailers make combined annual purchases of around $18 billion from suppliers. That makes the wholesale regime worth less than 0.03% of the market it was designed to open up.
Suppliers are too frightened to complain
The Gilmours case illustrates a structural problem the code was supposed to fix but hasn’t. The Grocery Supply Code review surveyed just 562 participants from more than 4,000 supplier contacts. Grocery Commissioner Pierre van Heerden acknowledged in 2025 the reason for that silence: the major supermarkets are the largest customers for most suppliers, creating a “reluctance for suppliers to report bad behaviour for fear of losing shelf access”.
Regulated grocery retailers receive over $5 billion annually in rebates, discounts, and payments from suppliers, with over 50 types of payment identified. That financial dependency is not a bug in the system. It is the system.
The first real test of GICA’s teeth
In July 2025, competition lawyer Andy Matthews noted this is the first time the Commission has brought a case under GICA for breach of good faith. Commerce Commission Chair Dr John Small said at the time that “cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly”. Foodstuffs North Island “strongly denies any unlawful conduct” and says it co-operated fully.
The outcome matters enormously. A strong penalty establishes that GICA’s good faith obligations have real consequences. A modest one tells the duopoly the new regime is manageable.
Tolerable penalties, rational behaviour
The Democracy Project’s analysis puts the reform effort in blunt terms: “There has been a full market study, a new Act, a Grocery Commissioner, a wholesale access regime, a ban on land covenants, and a worldwide hunt for a new entrant that approached 21 possible companies. The market is as concentrated today as it was the day all that work began.”
Grocery Commissioner van Heerden says the reforms “need more time to bed in”. New Zealand First has floated legislation to break up Foodstuffs into two nationwide co-operatives if behaviour doesn’t change.
The uncomfortable truth is that the duopoly is behaving rationally. Civil proceedings filed in mid-2025 with a trial not until 2027, uncertain penalties, and a wholesale regime generating a rounding error of sales volume – none of this changes the cost-benefit calculation for organisations with $18 billion in annual purchasing power. Every hospitality operator and food service business buying through Gilmours should be watching this case. If the penalty, when it eventually arrives, is modest relative to the commercial benefit of the alleged conduct, the answer to whether reform has worked will be written in the judgment.
Sources
- Commerce Commission: Proceedings against Foodstuffs North Island and Gilmours (2025-07-15)
- RNZ: Commerce Commission takes Foodstuffs North Island to court over alleged cartel conduct (2025-07-15)
- Newsroom: Gilmours hit with further grocery act breach allegations (2026-06-24)
- Commerce Commission: Annual Grocery Report 2025 (2026-06-02)
- Commerce Commission: Wholesale Supply Inquiry Preliminary Findings (2025-06-05)
- Commerce Commission: Grocery Supply Code Review Final Report (2025-10-16)
- NZ Herald: Commerce Commission report finds little change in anemic supermarket competition (2026-06)
- Democracy Project: The supermarket duopoly still rules (2026-06)
- NZ Herald: Foodstuffs, Gilmours accused of cartel conduct (2025-07-15)
- NZ Herald Listener: Supermarket wars – how broken is our grocery market? (2026-06)