The Commerce Commission (Commission) has launched a review of the Grocery Supply Code (Code) – the new ‘rule book’ for grocery suppliers – to see if it is operating as intended and helping to fix the power imbalance between New Zealand grocery suppliers and major supermarkets.

Regulation of the grocery sector

Off the back of the Commission’s market study into the retail grocery sector, the Grocery Industry Competition Act 2023 (Act) was enacted to improve competition (and therefore consumer outcomes) in New Zealand’s grocery industry. At the first reading of the associated Bill in Parliament, the then-Minister of Commerce and Consumer Affairs, Hon Dr David Clark, observed that the Commission’s market study had found:

• systemic competition problems in the grocery sector;
• that supermarkets were making excess profits; and
• that many suppliers were nearly powerless in negotiations with the supermarkets because they do not have other buyers of a similar scale.

The Commission was given powers to regulate the industry and Grocery Commissioner Pierre van Heerden was appointed to lead this work. The Commission’s work focuses on creating pricing and promotional transparency for consumers, establishing a code of conduct for grocery supply, establishing a wholesale regime to make it easier for new entrants to enter the market and for existing retailers to compete and innovate, and monitoring the sector and taking action if necessary to improve competition.

In September 2023 the Code entered into force, setting out the rules for the conduct of regulated grocery retailers (Foodstuffs North Island, Foodstuffs South Island and Woolworths New Zealand).  The purpose of the Code is to:

• promote fair conduct and prohibit unfair conduct between regulated grocery retailers and suppliers;
• promote transparency and certainty about the terms of agreements between regulated grocery retailers and suppliers; and
• contribute to a trading environment in which businesses compete effectively, consumers and businesses participate confidently, and which includes a diverse range of suppliers.

The Commission’s review

The Act requires the Commission to review the Code within two years of it coming into force. It has decided to start its review now, less than a year after the Code came into effect, as it has concerns that systemic issues are not being addressed and suppliers may not be benefiting from the Code.

The Commission has published a review paper that sets out the background to and context for the review, the purpose of the Code, potential issues and/or opportunities for improvement in the sector, and questions it would be interested in hearing answers to.

Feedback requested

The Commission is seeking feedback from suppliers, retailers, and any other grocery industry players  which might have ideas, experiences, and perspectives about the Code to help inform if change is needed. Initial feedback will also help shape the scope and direction of the review.  At the end of the review process, the Commission may amend, revoke, or replace the Code if it considers doing so to be necessary.

Feedback on the review paper is due by 16 September 2024, with a chance for interested parties to then cross-submit and comment on the draft review before it is finalised in mid-2025. For more information, see the Commission’s review page.

Our experienced Consumer Markets team is available to answer any questions you might have about the Act, the Code and the Commission’s review.