Minimum Pricing Practice Hurts Kiwi Consumers And Retailers

The Commerce Commission is reminding grocery suppliers that requiring retailers to charge above minimum prices for their goods can breach the Commerce Act.

Commerce Commission Chair, John Small, says that the practice can hit New Zealanders in the pocket as “it can prevent retailers offering lower prices to compete for customers”.

The Commission’s advice follows an investigation into instances of resale price maintenance which were uncovered during the Commission’s market study into the retail grocery sector.

“Kiwi consumers and retailers lose out when suppliers set minimum prices for their goods. It makes it hard for new retailers who want to compete on price to enter the market – without that genuine competition, consumers miss out.”

The Grocery Industry Competition Act, which came into force on 10 July 2023, gives the Commerce Commission new powers to monitor and regulate the grocery sector. The new function headed by the Grocery Commissioner will see a Grocery Supply Code to address the imbalance in power between retailers and suppliers and a dispute resolution scheme for suppliers and wholesale customers of the major grocery retailers.

“These measures will give confidence to suppliers who are negotiating with retailers, as well as to new and existing retailers looking to enter into supply agreements. This will improve competition and efficiency in the grocery sector, benefiting all New Zealanders.”

The Commission’s investigation into resale price maintenance found that in their dealings with now defunct retailer The Honest Grocer, three grocery suppliers set minimum prices for their goods. The Commission has sent Compliance Advice Letters to all three suppliers to remind them that this conduct can breach the Commerce Act.

Background

Resale Price Maintenance (RPM)
Resale Price Maintenance is a form of anti-competitive conduct and can be unlawful under sections 37 and 38 of the Commerce Act, unless authorised by the Commission. RPM occurs when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods. RPM can be harmful to competition and consumers as it interferes with the competitive determination of prices and may result in consumers paying higher prices for goods than they would otherwise.

This fact sheet explains how suppliers can avoid RPM, as well as the situations in which the Commission will prioritise RPM investigations.

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