The Commerce Commission has released a paper outlining the preliminary issues it may explore and the proposed scope for its market study into the grocery sector.

It says it expects the issues it will focus on will evolve as their understanding of the sector develops, and they’re asking for feedback from consumers, suppliers and retailers to ensure they “focus on the right issues”.

It lays out the terms of reference and a range of potential issues it has identified and may explore.

Its statement reads:

“The terms of reference, set by the Minister of Commerce and Consumer Affairs, require the Commission to consider the following matters:

  • the structure of the grocery industry at the wholesale and retail levels
  • the nature of competition at the wholesale and retail levels of the grocery industry
  • the pricing practices of the major grocery retailers
  • the grocery procurement practices of the major grocery retailers
  • the price, quality, product range and service offerings for retail customers.

In the preliminary issues paper, we have identified a range of potential issues we may explore, including:

  • how intense competition is between grocery retailers
  • whether features of the sector are affecting the potential for retail entry and expansion
  • what impact private label products have on competition at the supplier level
  • consumer purchasing behaviour, including how retailers’ pricing strategies and promotional activity affect consumer purchasing behaviour
  • whether any changes to the sector that may have emerged during the COVID-19 pandemic are likely to affect competition over the longer term.

In addition to studying the factors affecting competition, we intend to consider competitive outcomes in the grocery sector, including prices, choice, quality and innovation, the margins and profitability of grocery retailers, and whether there are other outcomes that are not consistent with those expected in a competitive market.

The purpose of our market study is to look at whether competition is working well for consumers, and if not, what can be done to improve it. It doesn’t look at prices in isolation. However, if retail competition is working, this will benefit consumers through the prices they pay for groceries, the quality of groceries being sold, the range of groceries available and the service that is offered.

The paper also seeks feedback on the Commission’s proposed scope for the study. This includes the Commission’s intention to focus on:

  • the two major grocery retailers, Woolworths NZ and the Foodstuffs Group, due to their high share of retail grocery sales
  • groceries sold to New Zealand retail consumers, not commercial consumers like restaurants or catering suppliers
  • a sample of key products to keep a focussed analysis of potential competition issues in the sector given the large range of products sold by grocery retailers.

We welcome feedback on our preliminary issues and proposed scope from all interested parties. We also intend to engage more directly with a range of stakeholders, including consumers and smaller suppliers and retailers early in the New Year.”

The preliminary issues paper features a series of questions that the Commission is seeking responses on. The Commission welcomes any supporting evidence that submitters may be able to provide with their submissions.

The paper can be found here.
Submissions can be uploaded on their website at www.comcom.govt.nz/groceries
Submissions close at 4pm on 4 February 2021.
The Commission is due to deliver its draft report mid next year and a final report by 23 November 2021.

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