FGC welcomes the passing of legislation banning covenants that impede the development of land or the use of a site for a grocery store.

The Commerce (Grocery Sector Covenants) Amendment Act 2022 deems such covenants as substantially reducing competition in the grocery market.

FGC says it is confident the Act as amended delivers on the recommendations of the Commerce Commission to contribute to the removal of barriers to the entry of others into the market.

“This Act is an important component of the overall approach to improving competition in the sector.

“We are pleased to see specific measures to deal with existing and future broad definitions of the grocery trade so other businesses, especially small operators, can get into malls and areas much more easily than has been the case for many years.

“We are also pleased to see specific mention of rights of first refusal, and the range of other measures that deal with anti-competitive arrangements that would otherwise contribute to blocking access of new entrants.

“It is particularly important for the monitoring of these measures to be facilitated for the Commerce Commission, and therefore we are pleased to see access to relevant documentation mandated for this purpose.”

The Act recognises other retailers that may compete with a designated grocery retailer.

This followed a submission by FGC that revealed a typical lease written by one supermarket that banned a vast range of non-grocery retail neighbours in leases, set site conditions for years after a tenancy ends, and required landowners to object to new developments or district plans at their own cost.

The lease showed the supermarket had defined its business as almost everything that can be sold by anybody, including clothing, fashion, luggage, sports and fitness goods, appliances, shoes, computers, insurance and lending, hair dressing services, banking, arts and crafts or childcare services – and they can all be banned under the terms of the lease.

The Act received Royal Ascent on 29 June – the day after it passed the third reading.

Watch Commerce Minister David Clark speak in the third reading debate here