Legislation to stop major supermarkets blocking competitors from accessing land for new stores is now being considered by a parliamentary select committee.
It was introduced into Parliament under urgency on Budget night by Commerce and Consumer Affairs Minister David Clark, and will be reported to the House by 16 June.
The Commerce (Grocery Sector Covenants) Amendment Bill amends the Commerce Act 1986, banning restrictive covenants on land, and exclusive covenants on leases. It also makes existing covenants unenforceable.
“This is a major first step in delivering on our commitment to ensuring New Zealanders get a fairer deal at the checkout,” David Clark said.
“This legislation stops supermarkets from engaging in the anti-competitive land wars we’ve seen, where they buy up land or dictate the terms of leases to block their competitors from getting a foothold in the area. This practice leaves customers without choice and sees suburbs and shopping centres with only one option.
“Limiting supermarket options for consumers severely restricts their ability to shop around for a better range of products, and of course, a better price.”
He told Parliament even in the most conservative estimate of the Commerce Commission in their recent study, the major grocery retailers were earning excess profits of $1 million a day.
“Now, those are beyond the ordinary profits you’d expect. It’s a commercial enterprise; they should be able to invest and receive profits. These are the excess profits – $1 million a day they are taking each and every day, over and above a reasonable profit, out of ordinary, everyday Kiwis’ pockets”.
“This bill … takes a first major step forward in salvaging our broken grocery sector.”
He said the legislation is just the first part of the Government’s response to the retail grocery sector market study, and it’s expected information about further steps will be released shortly.
The bill is being considered by the Economic Development, Science and Innovation Committee.
The Budget allocated $10.8m to help tackle the issue. The funding will establish a market studies response team within the Ministry of Business, Innovation and Employment, with the retail grocery sector report one of its top priorities.
The Budget said:
“This initiative provides funding for a dedicated team in the Ministry of Business, Innovation and Employment to focus on responding to Commerce Commission market study reports and improving competition,” stated the government in its Wellbeing Budget 2022. Initially, this initiative will fund the team to advise the government on its response to the Commerce Commission’s final report into the retail grocery sector and the upcoming Commerce Commission final report into residential building supplies, which is to be released in December 2022.”
The funding is spread across four years and comprises $10.74m in operating expenditure and $60,000 in capital expenditure.
Finance minister Grant Robertson also referenced the government’s commitment to boosting competition in the grocery sector, as part of its cost-of-living package in Budget 2022.
“The Commerce Commission’s findings indicate that restrictive covenants over land are a major barrier to supermarkets accessing new sites, so we’re banning these covenants from being used to stop competition,” Finance Minister Grant Robertson said.
Following the commission’s draft report, which highlighted the role property portfolios played in controlling competition, the two supermarket majors, Foodstuffs and Countdown, pledged to voluntarily lift restrictive property covenants and sell off land-banked sites.
Grant Robertson said the Government was also looking at how a Code of Conduct between major retailer and suppliers could be developed, and what role a dedicated regulator for the grocery sector could play.
- Work on the Code of Conduct is well under way, with meetings being held between FGC, the retailers and MBIE officials.