The Commerce Commission is set to undertake a market study into the Retail Grocery Sector

On 17 November 2020 the Minister of Commerce and Consumer Affairs announced a market study into the retail grocery sector through the Commerce Commission under Part 3A of the Commerce Act 1986 (Act).  The purpose of this study is to assess factors that may affect competition in relation to the supply or acquisition of groceries by retailers and to determine ways in which competition could be improved for the benefit of New Zealand consumers.

The full announcement can be accessed here.

A draft report for consultation is expected to be released around July 2021.  A final report will then be made available to the public by 23 November 2021.

Scope of market study

The Minister has released the Terms of Reference for the study which set out a list of factors that the Commerce Commission is required to take into account in carrying out the study.  These factors include, but are not limited to:

1. the structure of the grocery industry at the wholesale and retail levels;
2. the nature of competition at the wholesale and retail levels of the grocery industry;
3. the pricing practices of the major grocery retailers;
4. the grocery procurement practices of the major grocery retailers; and
5. the price, quality, product range and service offerings for retail customers.

In addition, the Commerce Commission will be required to engage with and gather quantitative and qualitative information from a range of key stakeholders in the retail sector including wholesalers, suppliers, distributors, independent grocery retailers, consumer bodies, government departments as well as the consumers themselves. 

The Commerce Commission will likely be paying close attention to the following factors in carrying out the study:

• market concentration;
• conditions for entry and exit into the market;
• cost structures;
• degree of differentiation in products or offerings;
• availability of substitutes;
• search and switching costs;
• applicable laws and regulations;
• market growth and technological developments;
• consumer and business behaviour; and
• access to information

The findings of the study will help to inform any changes needed to enhance market performance and consumer confidence in the retailer sector.  While the Commission’s recommendations are non-binding, the Government will be required to respond to any recommendations within a reasonable period after the report has been made publically available.

This will be the second market study undertaken by the Commerce Commission.  In December 2018, the Commerce Commission reported on its study which looked into factors that affect competition for the supply of retail petrol and diesel used for land transport in New Zealand. This involved an examination of the price and quality of fuel, the levels of profitability and investment, and the nature of consumer choices in the retail fuel industry.  In summary, the study found that New Zealand does not have an active wholesale market for fuel and that wholesale prices are higher than would generally be expected in a competitive market.  More information about this study including the findings of the final report (which was published on 5 December 2019) can be found here. 

If you have any questions about the article, please get in touch with our Disputes Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.