Commerce (Grocery Sector Covenants) Amendment Bill

I present a legislative statement on the Commerce (Grocery Sector Covenants) Amendment Bill.

ASSISTANT SPEAKER (Ian McKelvie): That legislative statement is published under the authority of the House and can be found on the parliamentary website.

I move, That the Commerce (Grocery Sector Covenants) Amendment Bill be now read a second time.

Groceries are an essential purchase and a major expense for most households in New Zealand. Competition is a key driver of price, quality, range, and service offered by grocers in New Zealand. Back in March, the Commerce Commission published its final report on the market study into New Zealand’s retail grocery sector, and that report found that competition was not working well for consumers in New Zealand, with excess profits estimated conservatively at $1 million a day accruing to the duopoly, straight out of Kiwi’s pockets—a million dollars a day every day over a period of some time.

The bill addresses the weak competition by giving effect to one of the Commerce Commission’s recommendations. I intend to introduce the second bill addressing the commission’s other recommendations later this year. The commission confirmed what was already suspected: that the duopoly had been engaging in anti-competitive land wars, where they buy up land or dictate the terms of leases to block their competitors from getting a foothold in any particular area. The Commerce (Grocery Sector Covenants) Amendment Bill amends the Commerce Act 1986, banning restrictive covenants on land and exclusive covenants on leases, and it also makes existing covenants unenforceable.

The bill will apply to the duopoly: so to Foodstuffs North Island Ltd, Foodstuffs South Island Ltd, and Woolworths New Zealand, including any successors, franchisees, or transacting shareholders of these companies. And it also provides the flexibility for including other grocery retailers—and that would be designated by Order in Council in the future under that provision.

I would like to thank members of the Economic Development, Science and Innovation Committee for their consideration of this bill. I do want to acknowledge the chair, Jamie Strange, for leading this work and for his contribution, and also want to acknowledge Opposition spokesperson Andrew Bayly for the constructive way he has engaged on these matters. I’d also like to thank all the submitters who considered the bill and took the time to provide feedback, especially given the shorter time frame. The committee received 22 written submissions on the bill, and heard oral evidence from five interested parties. Most submissions were either supportive of the bill or supportive of its intents and purposes. Some submitters considered the bill was an important first step but want further measures in future to improve competition; I agree with them, and that will be covered off in the second bill coming through. Two submitters considered the bill would be ineffective or harmful to business confidence—I say for completeness.

On 16 June, the committee unanimously reported the bill back to the House, recommending some amendments which I endorse. And I would like to mention five of these changes. Again, as I do that I do want to acknowledge the committee and I do want to acknowledge Jamie Strange’s leadership but also Andrew Bayly’s constructive engagement on these matters, as the detail was worked through by the committee over a brief period of time. So the committee raised concerns that that new section 28A of the bill may not be effective in capturing the full range of anti-competitive agreements supermarkets might use to limit the availability of land to others. And to address that, the bill as reported back includes several changes to new section 28A. And the Economic Development, Science and Innovation Committee recommended therefore that amending the definition of an exclusivity covenant to explicitly include rights of first refusals that the landlord might give the supermarket should be included. I think that’s a sensible thing to do.

Extending new section 28A to include other provisions in a lease or agreements outside the lease or land covenant that may contribute to a purpose or effect of impeding use of a site by competing retailers—and that’s to prevent designated grocery retailers obtaining the same benefit by combing covenants with other restrictive provisions. Broadening the scope of other retailers who might be affected by covenants the bill prohibits—and so that’s another recommendation. The bill would also apply therefore to covenants that impede other non-grocery retail stores that may compete with a designated grocery retailer. And the committee also recommended limiting the exception for covenants on retail fuel sites to those which are reasonably necessary for environmental impact reasons.

So the reported-back version of the bill also contains a process to make it easier for designated grocery retailers to voluntarily remove covenants affected by the bill from the title of the burdened or benefiting land or to modify the covenant so that it no longer contravenes new section 28A. This process would be available where a designated grocery retailer would, if not for Part 2 of the Act as amended, be entitled to enforce the covenant. Finally, the reported-back bill clarifies the possible ways a designated grocery retailer may have an interest in a covenant. This is to make this provision more explicit.

So the Government Supplementary Order Paper (SOP): I want to say a few things about that. The committee recommended creating a new power for the Commerce Commission to require information directly from designated grocery retailers about relevant contractual arrangements and the process for negotiating those arrangements. This would allow the commission to proactively monitor compliance with the provisions of the bill, the Commerce Act, and the Fair Trading Act 1986. This power would eventually be replaced by the powers given to the regulator of the grocery retail sector once that position is established. This recommendation was unanimously agreed on by the committee, but it was not included in the bill because it would likely have been struck out as beyond the scope of the bill. Instead, the committee opted for a provision it has inserted as new section 28A subsection 3A, which would give the Commerce Commission a monitoring function in relation to the bill.

So apropos the earlier point, I accept the committee’s view that a bespoke information-gathering power along the lines that were suggested would work better than the new monitoring function in subsection 3A. So I therefore intend to table a Supplementary Order Paper under Standing Order 315 to give effect to that recommendation. To address the scope issue, the SOP specifies that the commission’s power is limited to contracts, arrangements, understandings, or covenants to which new section 28A may apply. These requests for information would also be limited to the purpose of assessing compliance with specified provisions in the Commerce Act and Fair Trading Act.

Finally, I note the committee raised concerns that a designated grocery retailer may be able to make unreasonable claims for compensation or damages from their landlord because of the bill making the exclusivity covenant in their lease unenforceable. So section 89 of the Commerce Act has the potential to facilitate a process of renegotiating the lease to reflect actual losses incurred by the supermarket from greater exposure to competition in the area. The committee’s concern was about landlords having little protection against the potential for supermarkets to abuse that process. There are general provisions in contract law, the Commerce Act, and the Fair Trading Act which prohibit the kinds of behaviours the committee was concerned about—for example, undue influence, coercion, or unconscionable conduct. I considered these provisions should provide protection to mall and shopping centre owners. I also considered that the SOP would help mitigate some of these concerns by giving the commission the ability to proactively monitor these arrangements, including the process of renegotiating them as a result of the bill to assess compliance with both the Commerce Act and the Fair Trading Act.

So the bill will remove an important barrier to the availability of land for grocery retail, increasing the likelihood of a competitor to rival the current duopoly emerging in the retail grocery market. We are moving with speed because this is one of the more straightforward aspects of the Commerce Commission’s report to implement. I do thank again the members of that committee, because I do believe in the time frame that we’ve set, significant value has been added by the contributions both of the Government members—and I singled out Jamie Strange—and the Opposition’s Andrew Bayly to improve the bill to make sure that the purposes we laid out have been achieved and that the commission is set to have the monitoring powers it requires to do the job that will make for a more competitive grocery retail sector as a result of this bill, and therefore I commend this bill to the House.

The question is that the motion be agree to.

Thank you, Mr Speaker. It is a pleasure to be talking on the Commerce (Grocery Sector Covenants) Amendment Bill’s second reading. First of all, I’d like to acknowledge the Minister, and also I just want to make a call-out to the committee. It was a very constructive committee who looked at this bill, and I not only acknowledge members from Labour but also my good colleague Melissa Lee from National, who played an important role in this deliberation of a very important aspect of our lives. And of course the backdrop to this is that New Zealanders are suffering from a cost of living crisis that is growing ever more increasing and worrying for many New Zealanders because we have just got a rapid escalation in a whole range of costs: rents, fuel, and interests costs. But, of course, this bill deals with the issue around grocery, and, of course, we’ve seen significant increases in grocery prices in recent history.

I think it’s important—just for the context of this bill, which we’re talking about tonight—that this should be seen as one of a part or suite of changes that need to take place if we are to make sure that New Zealanders are in a better position to be able to live lives and afford good food, which is the hallmark of a good society. And I think it’s important that other proposals that have yet to be tabled in this House are tabled in this House to make sure that we do address this big issue. And I’m talking about the issue of a mandatory code of conduct that the Commerce Commission has felt in its report needs to be put in place and needs to have some real teeth about it to be enforced. We also need to make sure that suppliers are treated appropriately—there have been serious concerns about some of the treatment that certain grocery retailers have been applying on suppliers of food and products to the grocery trade. We want to make sure that consumers get greater access to information and that the grocery regulator, if it is a grocery sector regulator—which is a moot point because we haven’t yet seen this; it was one of the considerations of the committee. We understand the bill will come through later in the year, so we want to make sure that the regulatory power is appropriate and enforceable.

So this bill deals with the final aspect of the Commerce Commission’s recommendations, which is about restrictive covenants, and I think it’s a pity that this bill is being rushed through the House. Obviously, it was introduced under urgency on Budget night. The committee literally had, I think, 10 days to basically work its way through the proposed bill. We heard from five submitters, and there are a number of submitters who made very compelling submissions. I particularly wanted to call out Katherine Rich and the grocery retailers association who did a very good submission, but there are a number of other very good submissions that were helpful in the deliberation of the committee. And I think, as a result, we have probably ended up in a far better place than where we started on Budget night with a draft bill.

The first thing that we were occupied on as a committee is around the issue of what covenants should be kept under this bill. And we heard from Katherine Rich, particularly, who identified a whole raft of covenants that grocery retailers have already put in place—and they are very varied. So we worked our way through the different types, and the first question is: are we capturing all the appropriate covenants? And what we were concerned with in the original definition in the bill was a sort of limiting factor around how you define covenants. And, to some extent, we were particularly concerned about side letters. You might enter into an agreement in a land arrangement with a landlord to tenant a property, but there might be a different agreement that deals with how you’re going to pay the landlord, which might be based on a turnover arrangement that may in fact be in a separate agreement. And then there might be a side letter which says if there are going to be changes to the planning laws in this area that you operate in and you have your supermarket or you own a mall, then we require the landlord, in this case, to pose those changes in planning laws. And, again, that might be captured in another area of documentation. So the first thing was to make sure that the definition was broad enough to capture what was meant by “agreement”, and, obviously, the changed or amended wording captures and adds things like arrangements and other such technical terms to describe broadly agreements that may exist in varying forms between the grocery retailer and the landlord. So that was the first thing.

The other thing related to this is the first right of refusal obligations, and these are very significant arrangements where a grocery retailer—and there have been many examples of this that the Commerce Commission identified—will take a first right of refusal on using potential land that may become available in the future. It may even want to see that right after the supermarket is long gone and no longer occupying the premises. We were particularly concerned about those arrangements because that was another way of a grocery retailer potentially and, in some cases, actually stopping other competitors—other grocery chains—coming into New Zealand and setting up operations, because there may be an arrangement that goes back many years that still applies and that stops the landlord from basically being able to tenant that area to a new competitor.

Then we saw many examples—and Katherine Rich was particularly good on this—about what is meant by a “grocery retailer”. And the definition was extraordinarily wide in some lease agreements. It extended to provision of insurance schemes, and it extended to the sale of TVs, and a whole raft of areas—restaurants, cafes, or anything that could be construed as a potential competitor—had been and has been written into many retail grocery lease agreements. And, again, what this means is the footprint that the grocery retailers are able to exert over “potential competitors”—and I’ll say competitors in inverted commas because in many cases, it was hard to construe how they might even contemplate being a potential competitor or existing competitor of a grocery retailer. So that definition was very, very significant, and we were concerned that we captured that, and I think we have largely with the definition around covenants covered in the new section 28A and 28B.

One issue that we turned our mind to was the issue around compensation. We were concerned that grocery retailers might say, “Look, this is a Government-imposed change to our lease arrangements that we’ve had in place with you, landlord. We might want to see some compensation because, effectively, we’ve seen a loss of value through Government-imposed changes to our lease arrangement.” We considered that very, very significantly and for some period of time in the committee. We think this is an issue that is OK, because what we don’t want to see is retailers actually going to vulnerable landlords and trying to seek compensation.

The other one—and this is a very significant one—is the power of the Commerce Commission, and there were some discussions with the Minister about making sure that the Commerce Commission has the power to be proactive in monitoring these arrangements. At the moment, the Commerce Commission often responds to complaints, but we didn’t think that that was sufficient. We think that the Commerce Commission, first of all, needs to have the ability to be proactive and, secondly, to have the resources to do that. And so we’re looking forward to debating and discussing the Supplementary Order Paper that the Minister’s put forward, but I think we’ve landed in a pretty good shape, and I want to acknowledge all the committee and officials, but we’ll be talking more in time about this.

Kia ora, Madam Speaker. Thank you for this opportunity to speak and to acknowledge the previous speaker, Andrew Bayly. It’s nice to see some cross-party support for this, the Commerce (Grocery Sector Covenants) Amendment Bill. In the 2020 election, Labour campaigned on ensuring that shoppers pay a fair price at the checkout, and this piece of legislation is a small piece that goes towards ensuring that we fulfil that promise.

Now, in the first reading, I remember the Minister Dr David Clark spoke around good quality services, and that has four factors, around price, quality, range, and service. Looking at what is going on with the duopoly, the fact that they are often able to have a monopoly over the range is a challenge for those often in communities that are in my electorate of New Plymouth, where people have to use the service near them—in terms of what they’ve been able to do around these covenants. So this is a simple but good piece of legislation, and I commend it to the House.

I just want to just start off by saying it was a bit of a shock and that I was hoping that Glen Bennett might actually speak for a little bit longer to give me time to sort of relax into this bill. But it’s nice to actually see the member, because I think he’s been moved on to another select committee, and I haven’t actually seen him in the Economic Development, Science and Innovation Committee. But nice to have him back.

It is actually a pleasure to speak on the second reading of the Commerce (Grocery Sector Covenants) Amendment Bill in its second reading. As my colleague did, I’d like to first of all acknowledge the Minister for bringing this bill to the House, but I’d also like to acknowledge my colleague Andrew Bayly, who has actually done some substantive work in this bill, and all of the select committee members, given the fact that this bill was introduced in urgency and the select committee literally only had a very short time to actually get this back to the House. I’d like to commend the work of everyone involved, including the chair, Jamie Strange, who has actually worked really, I guess, cooperatively with Andrew Bayly, who is our spokesperson in this area, as well as all of the select committee staffers and officials who have actually come to help the select committee get to this point.

As Mr Bayly has actually said, the National Party will be supporting this bill, but there are some issues that we had, in fact, identified during the select committee process, which I’m sure that the Minister is actually well aware of.

Initially, when I saw this bill, I thought “Yep, this is quite a simple bill dealing specifically with two covenants that the Commerce Commission had actually identified.”, and they are the restrictive covenants that actually put restrictions on how land can be actually developed for land that might be attached to a shopping complex that the supermarket doesn’t actually—or the grocery entity, the two big duopolies might be connected to. They could potentially put restrictions on how those lands can be developed, to make sure that competition doesn’t actually develop. The other is the exclusive covenant provision that is often placed in, for example, big shopping complexes where they don’t actually want another competitor in the same complex—for example, let’s say in a Westfield shopping complex, they might have one grocery entity and they don’t actually want their competitor to actually have leases on that area.

And we’re identifying that when you have a situation like we have currently, when there is a huge cost of living crisis, you actually want to make sure that there is enough competition in place so that the prices will go down. I’m not quite sure that removing these two covenants will actually immediately produce that, but I commend the Minister for starting the work, and I look forward to more work in this space, because, at the moment, grocery is so expensive, and I think every household in New Zealand understands what it’s like to go shopping at the supermarket, whether it’s actually New World or Countdown. Both are just as expensive, as well as Pak ’N Save. But they’re owned by two entities. It is a duopoly. And the very fact that even our local dairies are owned by one of them and the wholesale shop, where dairies and other little shops actually go to do the shopping for the customers, is actually controlled by one of these two entities means that the duopoly could, effectively, control how much everyone actually pays for their groceries and their daily requirements. So putting any kind of legislative process, any kind of bills that would actually restrict their control over how much they charge, is, I think, a good thing.

But one of the things that I know that Mr Bayly did very well in explaining is that when we heard the submissions in select committee, I was, effectively, shocked to find out that within some of these covenants and the lease agreements that these supermarkets, in fact, go into with their landlords, there is a major restriction in what other shops can actually take lease. For example, the definition of “supermarket” seems to be extremely wide. When normal people think of a supermarket, you actually think about things like grocery shopping, whether it’s actually breads and meats and fish, fresh vegetables, and fruit. You often get things like Panadol, and there’s a bit of, you know, a section of pharmaceutical things that you can actually get for emergencies, for example. But you wouldn’t, effectively, think that it will prevent an actual pharmacy from setting up next to a supermarket, but the exclusive covenant could potentially restrict these shops from actually setting up.

For example—and I know that the Food & Grocery Council’s Katherine Rich’s submission was actually quoted by Mr Bayly. But would you think that even childcare services is considered a supermarket activity? Banking, finance, arts and craft, even men’s shoes and hairdressing is considered supermarket activity, and it is actually built into some of these leases, which makes it potentially unable for one of these shops, a hairdressing salon, to open up at these stores, whether it’s actually a Westfield, that one of the supermarkets might have an exclusive covenant in. So it could also mean that a childcare centre could not potentially open up, because it would be deemed part of the lease where the supermarket entity, the grocery entity—one of the two duopolies—have an exclusivity with the landlord. I’m sure that that’s not what they intended to do, perhaps, but it is there and it does actually prevent these entities from actually opening up other competition to the supermarket entity that exists.

New Zealand is at a time—I mean, the world is, I guess, and New Zealand is currently going through this huge cost of living crisis, and anything we can actually do to reduce costs for mums and dads out there who have to go to the supermarket and see the prices for meat, for example, or fresh vegetables currently. It is shocking, and we need to do more to make sure that we create competition in the market to bring down the prices. This bill doesn’t actually bring about that competition immediately, but it does actually start the process, and I look forward to the next bill that the Minister will actually bring.

One of the things that we were quite concerned about, which Mr Bayly actually did a lot of work on, was in terms of the compensation that the supermarket entities could potentially ask of the landlords when these covenants are actually removed or become illegal, because they might actually have the power to say, well, effectively, by removing the exclusivity rights and also the restrictive covenants where they actually prevent the land from being developed to actually build another supermarket nearby might mean that they are losing, you know, hypothetical revenue, and they could potentially get the landlord to compensate them. It could be huge amounts of money.

I think, effectively, when the supermarket chains are actually dealing with an entity like Westfield, it’s a big, big, big entity versus another big entity, so it won’t be such a big problem, but when you talk about a mum and dad landlord who might live in regional New Zealand or a smaller town New Zealand where they do not have the power base, they have a power imbalance and the landlord doesn’t have the kind of power that these supermarket chains actually have, and that is something that we would like to make sure that we provide in the bill. So I look forward to the Supplementary Order Paper that is actually coming, and, hopefully, we can talk more about that. I too commend this bill to the House, and I support it fully.

Thank you, Madam Speaker. As a relatively new member of the Economic Development, Science and Innovation Committee, I also wanted to thank submitters and acknowledge the collegial and really valuable contributions made by members across the House—in particular, Andrew Bayly.

The bill focuses on covenants, and it is being progressed quickly because the bill signals this Government’s commitment to responding to the Commerce Commission’s grocery retail market study. It’s relatively straightforward, it has the support of the major grocery retailers, and further reforms—as we have heard—will be considered later on this year.

In a nutshell, anything that we can do to improve competition by enabling new entrants or by the expansion of smaller players will provide consumers with greater choice, whether that be range of goods or whether it is in relation to quality, but, most importantly, it will impact price. It’s difficult to assess the impact on any one element of this reform programme, but, as a package, this Government is really confident that the reforms will deliver change and make things fairer for people at the checkout. So I’d like to thank Minister Clark and commend this bill to the House.

Tēnā koe, Madam Speaker. I’m privileged to be speaking in the second reading of the Commerce (Grocery Sector Covenants) Amendment Bill. I want to mihi the Economic Development, Science and Innovation Committee. I met some of the members who have spoken in today’s reading, and acknowledging that the history of this bill comes from an extensive report by the Commerce Commission, and actually, people on the ground who have been signalling for many years that the supermarket industry is broken, that the duopoly is taking advantage of ordinary people, and that there needs to be urgent changes to the legislation that enables this anti-competitive behaviour. So we welcome the introduction of this bill.

We of course would have liked a much more robust and thorough select committee process, but I also want to acknowledge that sense of urgency by Government to address some of these issues. I echo the sentiment that while this bill is really needed, we need more reforms to address those immediate needs that families are facing when it comes to meeting the cost of living. This bill may not have an immediate impact on people’s ability to provide for their families, but it is so important that we address what is, effectively, corporate greed via the use of land to prevent competitors from being there to help lower food prices. This kind of use of land for the purposes of, basically, preventing competition should have no place in Aotearoa, but I do also want us to look beyond the idea of simply increasing competition as a way to ensure that everybody has access to kai. As part of the Government’s overhaul of the legislation that dictates how supermarkets can operate, I think it’s also important that we look at supporting many indigenous practices that have been here for centuries that have provided food for their communities. So I look forward as well to commitments around increasing funding for papakāinga.

In relationship to the select committee’s recommendations, I wanted to particularly welcome the recommendation to broaden the scope of the proposed new section 28A to ensure that, basically, the intent of the bill is met. I think, as others spoke about, there were some really important issues being raised at the select committee, particularly on issues of compensation. As one of the previous speakers—Melissa Lee—noted, it does seem like the issue of compensation between, effectively, commercial landlords and supermarkets will often be fought between two big players. I do think it’s interesting that supermarkets could be raising the issue of a loss of revenue as a result of this change of legislation when the reports have told us that supermarkets are making massively excessive profits. So I think this is a price that supermarkets should be ready to pay, and, in fact, I think part of the aim of this will be to reduce the excessive profits that this sector is making at the expense of ordinary New Zealanders.

So the Green Party is happy to support this bill through this stage, and we look forward to the Supplementary Order Papers being introduced later.

It’s great to hear about duopolies, as we’re in this House with the Labour duopoly over there and the National duopoly over here, and the emerging market player, the ACT Party, who is expanding in this market. There’s a simple analogy here that what’s good for the goose is good for the gander. I’m going to set it straight: the Government’s pledge to help supermarket shoppers get a fair deal and why there is a bit of a myth here around some of the facts. Let’s start with those, and we’ll talk about market intervention at the end.

Food prices are being pinned on supermarkets as their fault, yet in the year from March 2021 to March 2022, food prices increased by 6.7 percent. The Government’s go-to excuse is to blame the greedy supermarkets. Though ACT agrees that New Zealand needs competition—and where there’s a market failure, we will intervene—Countdown and New World are not to blame for the food price explosion. The Commerce Commission report on the sector found that excess profits—and I’d really like to clear this up—which gets the blame for the legislation and sort of moral virtue of this rejig, were at almost $86 per New Zealander. Now, that’s less than 2 percent of the average New Zealander’s annual grocery spend. So between March 2021 and March 2022 alone, prices have increased by $282 per person, and even if the Government wants to focus on supermarket profitability, they’ve no one to blame but themselves.

New Zealand has the most stringent foreign investment laws in the OECD. The Resource Management Act (RMA) makes it exorbitantly expensive to build new supermarkets with scale and facilities that actually can compete. Several analysts actually argue: is there any space left to do this? Is there any growth left in the market to make this work? Our strict liquor laws give competitors another tool with which to bludgeon newcomers, and all the while, the Government is threatening any newcomer that they might be forced to share their expensive new supply chains with their competitors. So is it any wonder that foreign supermarket chains don’t want to see New Zealand as an attractive destination for expansion and would probably rather go to Australia?

Instead, the skyrocketing cost of food is driven by global forces, as we hear, compounded by bad Government policy, and red tape is constantly pushing up costs at the farm gate. According to Beef and Lamb New Zealand, on-farm price inflation from March 2021 to 2022 was more than 10 percent. This is exacerbated by excessive restrictions like national winter grazing rules that ignore regional differences and, simply, the RMA makes it more difficult for farmers to respond to higher prices by expanding facilities, and in some areas where New Zealand producers supply the vast majority of our needs and set local prices, these cost pressures may be transmitted on to the consumers in the form of higher prices.

To bring food prices under control, we need to kill inflation. It doesn’t matter how we structurally rejig buildings in various towns and cities, that is the key goal. To bring food prices under control, we need to free up the supply chain from the farm to the fruit and vege aisle. So ACT has got some additional ideas. To start on from the rejigging of the covenant base of the existing duopolies, it’s that we need to repeal and replace the Resource Management Act to make it clearer and easier to build new supermarkets and farm facilities and repeal stifling new regulations on farmers, including input costs and management, and we need to exempt OECD members from the Overseas Investment Act, allowing foreign supermarket chains like Aldi and Costco to invest in New Zealand with certainty. Why would you invest here if you didn’t have that certainty?

So this is one of the few situations in which ACT supports State intervention for market failure. If supermarkets are going to be brought on-stream and are using covenants in an anti-competitive way, this does merit Government intervention, but let’s be honest in the House and say that inflation is the driver of supermarket prices and that the important thing for New Zealanders is that food arrives on time, on the shelf, in the right place to feed the families of New Zealand. Thank you.

I’m not sure what bill that member Damien Smith was speaking on, but I’d like to bring us back to this bill if I may, which is a clear and simple case of market failure—which I think the member got to at the end of his speech—and the need for the Government to intervene. In the brief time that I was able to sit on the Economic Development, Science and Innovation Committee as a guest, it was really great to see the rigour which all the committee members applied to what things supermarkets might to do in order to get around the legislation. I’m not saying they’re wrong to do that—that is how markets work—and the contributions of people like Andrew Bayly were really helpful.

I’d like to commend the Minister for the changes that he has made in the Supplementary Order Paper that he is introducing, which takes those comments into account, and also giving thought to the Commerce Act and the Fair Trading Act and their application to compensation and saying “No, we don’t need to do anything additional.” So it’s a great piece of legislation, and I commend it to the House.

ASSISTANT SPEAKER (Hon Jacqui Dean): Joseph Mooney—five-minute call.

Thank you, Madam Speaker. I rise to speak on the Commerce (Grocery Sector Covenants) Amendment Bill. The National Party supports this bill, which amends the Commerce Act 1986 adding new section 28A, in clause 4, which will apply to covenants that have the purpose or effect of impeding the development of land or the use of a site for a grocery retail store, deeming such covenants as having the purpose or effects of substantially reducing competition in the relevant market. The National Party very much supports enhanced competition in markets and seeing regulations and law that actually makes it easier for that competition to happen.

We are in an extraordinary environment at the moment with inflation at 30-year highs, in New Zealand, and food, as a consequence, is on everyone’s mind. Although this will certainly not address a lot of those issues, it will make it easier for competition in the grocery retail sector, which is something that is to be supported.

According to the Commerce Commission, restrictive covenants are promises not to do something that are registered against land and impose restrictions on how that land can be developed or used. They bind any third parties who subsequently acquire or lease that land. Examples are that, first, on the sale of land by a grocer retailer to a third party and a consideration for that purchase, the vendor agrees to register a covenant against other land in the area that the vendor is retaining. Exclusive covenants are provisions contained in leases that restrict competitors from operating the same shopping centre. The Commerce Commission found that these generally have durations of 20 or more years, so, in effect, this has reduced local competition, which is what we have been advised. This bill will do something to actually make it easier for other competitors to come into the market and will, hopefully, address some of those competitive pressures that are needed to actually drive a better market.

We would certainly like to see some attention by this Government on food. Food is a crucial issue globally as well as domestically. The security of food supply is something that is an increasing issue around the world and the price of food is something that’s really, really important for everybody. We need water, we need food, we need shelter, and this is a bill that goes a small way but an important way to addressing the issue of food.

In terms of the select committee report, the Economic Development, Science and Innovation Committee has examined this bill and recommends that it be passed and recommends all amendments unanimously. So it recommends broadening the scope of new section 28A, which has a number of changes—to broaden the scope of the proposed section to ensure that it appropriately covers the types of behaviour that this bill seeks to prevent. They recommend inserting another section to state that “any other provision of a contract, arrangement, understanding, or covenant can be taken together with that restrictive covenant to determine whether section 28A applies. This would apply to provisions in other contracts, arrangements, understandings, or covenants that have 1 or more of the same parties as a restrictive covenant (‘side agreements’). … [The] proposed section 28A(2)(ba) would achieve the same effect for exclusivity covenants.”

The committee was concerned that agreements such as side letters were not covered in the terms of the initial drafting of the bill. Submitters also said that some exclusivity clauses can impede retail grocery stores at other locations, not just at the same site. However, the committee “did not see any reason for distinguishing between exclusivity covenants that affect the same site and those that affect other sites. Given that the bill’s intent is to improve competition in the retail grocery sector, the focus,” the committee felt, “should remain on whether the covenant impedes another person from operating a retail grocery store.” Therefore, the committee recommended removing the words “at the same site (for example, a mall or a shopping centre)” from the proposed section.

Some submitters also said that “limiting the target of the covenant to retail grocery stores would not prevent large grocery retailers from using restrictive and exclusive covenants that impede other retail developments.” To restrict that type of anti-competitive behaviour, the committee proposed “broadening the scope of covenants affected by the bill to recognise other retailers that may compete with a designated grocery retailer.” For example, I do not want to see the grocery trade continue to have the ability to restrict so-called competitors, such as those selling alcohol or pet food. And the committee recommended amending new section 28A(2)(a) to state that: section 28A also applies to impeding “any other retail store that is likely to compete with the designated grocery retailer.” It recommends similar amendments to new sections 28A(2)(aa), (b), and (ba).

It recommends adding an express provision to the bill to ensure that the Commerce Commission would have sufficient powers to monitor and enforce 28A. The commission does have existing powers that it can use to carry out its functions under the Act. They include powers to require people to supply—[Time expired]

I call Camilla Belich—five minutes.

Thank you, Madam Speaker. It’s a pleasure to stand in support of this bill—the Commerce (Grocery Sector Covenants) Amendment Bill. This is a bill that was introduced around about the time of the Budget and addresses some of the issues that we have with the duopoly in the supermarket sector.

There seems to be general agreement as to the need for this particular piece of legislation and also that it is a good idea. So I commend the select committee for its quick work on this bill and also the Supplementary Order Paper as introduced by the Minister.

This bill will address the current duopoly that we have in the supermarket sector and address some of the higher prices that New Zealanders are facing when paying for groceries. It’s the Government recognising that and making sure that we secure our recovery and provide a better deal for all New Zealanders when they’re doing their grocery shopping. I commend it to the House.

Kia ora, Madam Speaker. This bill demolishes a barrier to the availability of land for grocery retailers and increases the ability and the likelihood that we’re going to get some real competitors to the current duopoly. It is extremely heartening to take part in the first stage of busting this duopoly, the duopoly currently holding customers and would-be retailers to ransom.

I was not on the select committee, but it is heartening to also note that the Economic Development, Science and Innovation Committee has reported back unanimously, including agreeing a number of improvements. These are improvements that Minister Clark has, of course, endorsed. In particular, I was heartened to see the rescue of the interim information-gathering powers by Supplementary Order Paper.

It is quite staggering to understand the scale of the covenants that supermarkets have managed to wheedle out of landowners. It is very concerning to know that and it is chilling. And the people, of course, most affected by the cold wind are the consumers that we are here to protect, who have been forced into dependency on our duopoly. We campaigned to bring fairness to the sector. Minister Clark is here to deliver. I commend it to the House.

I start by saying National will support this legislation, or continue to support it, because it is a step in the right direction, albeit a small one of the 14 recommendations that came forward from the Commerce Commission. This is around two of them, and I’ve got to say, for those out there who are struggling with the cost of living and think the food costs are too high and they’re having to face choices over feeding their kids or paying the bills, for the Government to send this to committee with nothing else around it actually will leave them wanting and disappointed.

The reason for that is that, yes, there is an anomaly in law that means that others have been able to put covenants on land, which in the end stifles competition—whether they did that knowingly, willingly, or for other reasons, it did have that effect. But this piece of legislation itself, when it goes through the House, won’t do a single thing in the short or medium term when it comes to the cost of living crisis that every household in New Zealand is currently facing—nowhere more so than their rents and the food that they buy. I’ve got to say to the Minister, it is a step, albeit a small one, but it is nowhere near enough.

Some time ago, when I was on the committee that dealt with this, the Economic Development, Science and Innovation Committee, the Commerce Commission came before us for a hearing and we talked about this and I pushed them on whether or not they were looking at other reasons why the cost of food had increased and was going up. They said no, the Government had directed them with a very narrow scope only for the supermarkets. They therefore didn’t look at the role that the Government themselves has played in the escalation of the cost of food, not just on the supermarket shelf but on every single shelf in New Zealand. I’m sure we’ll hear from Government members that it’s just the supermarkets alone and those bad people from Australia who are solely responsible. But what they are not able to answer is, if it is the supermarkets alone, why is it when you go to a market as far away from a supermarket as you can find, without restrictions of covenant over the land or trading, that those costs have gone up as well? And why is it that in the takeaway shops and the fish and chip shops that every single part of New Zealand where food is sold fresh, frozen, processed, or cooked, the costs have gone up? That is because of the role that this Government has paid in red tape, in rules, in bureaucracy and actually, I think, in deciding that businesses can just suck up extra costs imposed on them by Government, and it has no implication at all.

We’re very happy to support this. We equally will be happy to support more meaningful changes the Government brings forward that mean that food prices already stop escalating so very, very quickly, but actually perhaps have a chance to go down. But, sadly, I think we’ll be waiting a long time. Because it feels that when the Government came under pressure before the last election—because things were so very expensive and going up quickly—they called for an inquiry on the part of the Commerce Commission exactly the same as in their first term in Government at the very beginning when fuel prices were ramping up and the Government was piling taxes on fuel. When they came under pressure, what did they do? They didn’t take tax off then. They didn’t actually have a look and decide for themselves what to do to help the poor old motorists—and by the way, when the Government puts tax on fuel and prices go up, that flows through to the cost of food as it’s driven around the country, from the producer to the supermarket or to the shelf. What did they do? They called for an inquiry into the petrol stations themselves, and when that inquiry came forward with recommendations, they put a lot of money aside for the Commerce Commission to continue to monitor it, but actually continued to put tax up until very, very recently where we have a short-term relief of tax, even though petrol is through the roof and that tax is flowing through.

So in this respect, I am quite deeply concerned that all we will see from the Government is this inquiry. They’ll pick up a couple of things in it, but they will continue to pass laws or pass regulations that have the impact or the consequence of prices going up in New Zealand, particularly on food. It’s not good enough for the Prime Minister to send this Minister out—who is very, very hard-working; actually, he’s probably done more in the area of commerce under extremely narrow circumstances, in as far as what the Prime Minister and Cabinet will allow him to do. But it’s not good enough for her to send him out and say, “Here’s a report into supermarkets, go and do a little bit there and if it gets really bad—I know, we’ll call for another inquiry.” We see this time and time again. And I’m making the point through other examples of where the Government does this to show why this isn’t going to have the impact that the Government is saying it will, and prices will continue to go up in every single outlet that sells food in New Zealand because of Government action and, in this case, inaction.

Think about what we’ve seen just recently for our builders and homeowners and those who are struggling because there’s not enough plasterboard in New Zealand. Do you know what the Government’s done? They haven’t gone out and sourced more. They haven’t changed the rules instantly so we can bring it in from overseas and actually have it available so the houses that are sitting there not finished will get built. What have they done? They’ve called for another inquiry. Another inquiry. Well, the point of this is the Minister has stood up and every other Labour MP has stood up and taken at least two minutes of their 10 minutes to say, “What a wonderful thing this is!” and “Aren’t we all doing a great job?”. But in the case of fuel, in the case of plasterboard, all they do is call for inquiries and make the bare minimum of change so that the public is led to believe, or hopes—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Order! Can I invite the member to now come back to the bill.

I will. So the good news here for New Zealand households is that no longer will supermarkets and others be able to put covenants on land that don’t have supermarkets on them, and therefore stop them from being able to sell food. But what we know is the speed with which it takes consent to be issued in this country, through building consents and resource consents and other things, I guarantee that as a result of this legislation we won’t see a single additional extra supermarket built anywhere, chain or otherwise, between now and the next election, and that food prices will continue to go up during that period of time.

So the Government needs to look at itself. This is good in that it is dealing with two of the 14 recommendations issued by the Commerce Commission on the very narrow scope they were given in their inquiry, but there are things that the Government can do right now, today, to relieve the pressure on households who are struggling, and they need to dig more deeply and do that. The reason they need to do that is the majority of people in New Zealand don’t have the luxury of the large salaries that a Cabinet Minister has when it comes to meet extra costs going up. And that’s why this country needs these Cabinet Ministers to do their job properly, to work harder and to identify things they themselves have done that are pushing the cost of food up.

I say it again, actually: if it was solely the responsibility of the supermarket and these two chains—the reason that the prices have gone up so much—as the Government has said to New Zealanders when they called for the inquiry with that very narrow scope, then it would only be food in supermarkets that had increased in cost. But it’s not, it’s in every market, it’s in every fast food outlet, it’s everywhere that food is wholesale or retail in New Zealand. The Government bears as much, if not more, responsibility for that as the supermarkets do themselves.

We’ll support this because it’s a small step in the right direction. But if this is the only step the Government delivers between now and the next election, it will be the same as what’s happening with plasterboard. It’s the same as what happened with fuel. These costs will continue to go up because of the Government’s role in this, not the people in the marketplace alone.

Mānawatia a Matariki, Madam Speaker. Can I round this debate off by acknowledging the Hon Dr David Clark for his work in the Commerce (Grocery Sector Covenants) Amendment Bill. This bill demonstrates the value of extra powers the Government gave to the Commerce Commission in 2018 to undertake market studies in areas where there are demonstrable failures in the market.

To round it off also, can I acknowledge the Opposition for supporting this particular bill. A lot of their big talk this evening has been about the cost of living. In fact, I’m happy that you’re supporting this bill, because where it makes real change for families in New Zealand, you haven’t supported those bills out of Budget 2022—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! The member won’t bring the Speaker into the debate. Thank you.

Apologies, Madam Speaker. Supermarket chains have been able to act against the interest of consumers and ordinary families for far too long. This bill sets out to change that, and I commend this bill to the House.

Motion agreed to.

Bill read a second time.

I declare the House in committee for consideration of the Financial Markets (Conduct of Institutions) Amendment Bill.