Large Supermarket Fine A Warning For Consumers

The large fine imposed on supermarket co-operative Foodstuffs today for “deliberate” and “serious” anti competitive behaviour should serve as a warning for all consumers about how far this company will go to protect its profits at the expense of consumers, Grocery Action Group (GAG) chair Sue Chetwin said today.

“While the co-operative claims it works on behalf of its customers, its actions show completely the opposite. It is a serious breach of customer trust.”

GAG wants to see grocery prices come down for all consumers, Chetwin said. “This fine and the actions of Foodstuffs show how important it is for our broken supermarket sector to be fixed. That means more competition and the ability for the Commerce Commission to be able to force divestment of stores by the duopolist’s – Woolworths and Foodstuffs,” she said.

Foodstuffs, which owns New World and Pak’nSave was fined $3.25 million in the Wellington High Court today, for deliberately trying to hinder rivals from opening new supermarkets or developing existing ones in Wellington’s Newtown and Petone, and in Tamatea in South Napier. It did this by using land covenants, some of 99-year duration. These effectively prevented competitiors in local towns and cities from setting up. Those covenants are now illegal.

Chetwin said these actions showed contempt for consumers. They serve as a warning of how far Foodstuffs will go to protect its patch and its profits. The company has applied to the Commerce Commission to merge its North and South Island operations, which GAG strongly opposes. To allow the merger would give Foodstuffs even more power over what is on the supermarket shelves and at what price. Consumers would have less choice and suppliers less ability to negotiate, Chetwin said.

A supermarket study released by the Commerce Commission in 2022 found a lack of competition in the supermarket sector, the duopoly of Woolworth and Foodstuffs making more profits than they should if there was workable competition, and unfair practices. The OECD in a recent report also found a lack of competition in the supermarket sector and suggested it might be time for the commission to have more powers to break up the duopoly.

“New Zealanders are paying some of the highest prices in the world for groceries and that is down to a lack of competition," Chetwin said.

Today’s fine shows just how hard it is for competitors. It also comes against the backdrop of a new University of Auckland study on the impact of high food prices on our most vulnerable communities. It has found the soaring price of food means families who are most stretched cannot afford to feed their children a healthy diet. Along with children’s advocates, we urge the goverment to prioritise children’s health over grocery profits, Chetwin said.

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