10 actions to deal with supermarket imbalance

Consumer NZ has proposed 10 key interventions to break the power of the country’s two supermarket chains.

If the suggested measures are ineffective in bringing greater fairness to the grocery sector, the consumer advocate suggests supermarkets should be forced to sell some stores.

‘‘This unfairness of high supermarket prices exists because of the duopoly of Foodstuffs and the Woolworths Group, and this needs urgent reform because shoppers are suffering,’’ Consumer NZ chief executive Jon Duffy said.

‘‘The option of the breakup of the supermarkets must remain alive.’’

Foodstuffs owns the Pak ’n Save and New World brands, and Woolworths Group owns the Countdown chain.

In November, the Government asked the Commerce Commission to investigate whether competition in the grocery sector was working well, and if it wasn’t, to work out what could be done to improve it.

The commission’s preliminary

finding in its draft report, issued in July, was that competition was not working well for consumers.

Consumer NZ said the high degree of concentration in the sector is significantly detrimental to consumers and suppliers.

If competition was more effective, supermarkets would face stronger pressures to deliver the right prices, quality and range to satisfy a diverse range of customer preferences.

‘‘The sector is characterised by persistently high margins and high barriers to entry,’’ it said.

It proposed five actions to benefit supermarket suppliers:

A mandatory code of conduct to govern relations between grocery suppliers and supermarkets to address the imbalance of power.

Appointment of a supermarket commissioner to ensure the code of conduct is monitored and enforced, and who has the power to independently investigate complaints and impose penalties for noncompliance.

Allow collective bargaining on behalf of suppliers to help redress the imbalance of power between suppliers and supermarkets.

Require supermarkets to supply other retailers with groceries at competitive wholesale prices. It wants to see an enforceable commercial arrangement.

Prevent supermarkets placing restrictive and exclusivity covenants on land use.

Food suppliers were often vulnerable to exploitation as the perishable nature of their products meant they had little ability to hold out for better terms, it said. Because it will be costly for an individual business to take action under the Fair Trading Act, the Commission wants the act amended to allow suppliers to directly challenge unfair terms.

It also suggested five actions to benefit supermarket shoppers:

A mandatory unit pricing; an information standard on supermarket displays and promotions; an end to discounts for loyalty cardholders; monitoring of prices and annual reporting on retail margins; higher penalties for misleading pricing.

Duffy said supermarket ‘‘dishonesty’’ needed to be exposed.

‘‘Supermarkets are stiffing New Zealanders on price,’’ Duffy said. ‘‘Supermarkets need to be honest with their pricing and show unit pricing. We would like to see an information standard in place on prices that consumers can access.

‘‘The investigation lifted the veil of secrecy on . . . a situation where shoppers and wholesalers have nowhere else to go and are beholden to two supermarket operators for an essential service.’’

The commission’s final report is due in March next year.

‘‘Supermarkets are stiffing New Zealanders on price.’’ Jon Duffy Consumer NZ chief executive