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 third time.

This bill is the first of many reforms to improve the state of competition in the grocery retail sector. Grocery is an essential purchase and a major expense for most households in New Zealand. Competition is a key driver of the price, quality, range, and services offered by grocers in New Zealand. More workable competition ultimately benefits New Zealand consumers. The Commerce Commission’s final report on the market study revealed that competition has not been working well for New Zealanders for many years.

This bill gives effect to one of the commission’s recommendations. I intend to introduce a second bill giving effect to the commission’s other recommendations later this year. Specifically, the bill amends the Commerce Act 1986 to directly prohibit covenants and other arrangements supermarkets have been using to restrict the availability of suitable sites to those who might compete with them. It’d also apply to existing covenants and arrangements, making them unenforceable.

Although this bill is, effectively, a response to harmful conduct by the major grocery retailers, it should be noted that all three of those companies have accepted the Commerce Commission’s findings—that’s Foodstuffs North Island, Foodstuffs (South Island), and also Progressive Enterprises. They’ve accepted the Commerce Commission’s findings and have worked to distance themselves from the covenants in question.

However, ultimately, legislative change is necessary to deliver effective and uniform results. The bill provides competitors with the confidence that they can acquire suitable sites for development or enter into leases without the legal impediment these covenants and other arrangements were designed to create.

The bill will apply to covenants that exist for the benefit of the major grocery retailers—Foodstuffs North Island, Foodstuffs (South Island), and Woolworths New Zealand. It will also include any successors, franchisees, or transacting shareholders of these companies, and it also provides flexibility to include other grocery retailers in the future by Order in Council.

Instead of requiring an assessment of whether the covenant substantially lessens competition in the relevant market, the test in the new section 28A is intended to be relatively straightforward. Is the covenant or other provision one in which a designated grocery retailer has an interest; if so, does it have the purpose, effect, or likely effect of impeding someone else from operating a store in competition with that designated grocery retailer? The hope is that parties interested in acquiring or operating on a site will be able to answer those questions without the assistance of the courts. If legal disputes arise, they ought, at least, to be more factually straightforward than a case under section 27 or 28 of the Act.

I’d like to thank, again, members of the Economic Development, Science and Innovation (EDSI) Committee for considering this bill within the time frame. On 16 June, the select committee unanimously reported this bill back to the House. The select committee identified some worthwhile ways to broaden the new section 28A of the bill so that it captures the full range of agreements that supermarkets may use to limit the availability of land for competing retailers—for example, the bill now prohibits covenants that impede the operation of other non-grocery retail stores which may compete with a designated grocery retailer. The bill also contains a provision to make it easier for designated grocery retailers to voluntarily remove covenants affected by the bill from land titles.

I’d also like to talk briefly about the role of the Commerce Commission in supporting the implementation of this bill. Later this year, I will be introducing legislation that confers a range of new functions and powers on a grocery regulator. That will include scrutiny of the major grocery retailers’ interests in land.

However, the close oversight of a regulator will be needed immediately. That is why the bill now includes section 28C, which will enable the Commerce Commission to require information from grocery retailers about whatever covenants or other arrangements may be affected by the bill and negotiations entered into as a result of the bill. The commission would do this for the purpose of assessing compliance with provisions in the Commerce Act and the Fair Trading Act.

I’d like to offer the House my assurance once again that the Commerce Commission is fully aware of our expectation that it makes proactive use of this new power. The Commerce Commission traditionally looks into matters only when someone draws their attention to a potential contravention of the Commerce Act. More proactive monitoring of arrangements affected by this bill is necessary to ensure it’s effective.

The process of renegotiating arrangements affected by the bill may also justify scrutiny by the Commerce Commission. This will help to identify any instances where major grocery retailers use their greater resources or purchasing power to obtain other benefits that were not intended by the bill. The information-gathering power is intended to provide landlords with some additional comfort that they will be protected against any improper pressure supermarkets may exert if they are seeking to renegotiate terms of the lease. There are general provisions in the Commerce Act and the Fair Trading Act which prevent the sorts of behaviours that the committee was concerned about.

So, in conclusion, I would like to acknowledge the pace at which the bill has been moving and the people who have made this possible. The members of the EDSI Committee, who met well outside their usual hours to identify improvements to the bill; the staff supporting the EDSI Committee; those who made submissions on the bill; my officials and the Parliamentary Counsel Office staff who put in long hours to get changes to the bill drafted during and after select committee.

The need to remove these barriers to the availability of land for grocery retail is an important one and an urgent one. It demonstrates the Government’s commitment to securing the benefits of greater competition in the retail grocery sector, including better prices, quality, and range—as well as services—when it comes to groceries. I commend this bill to the House.

Debate interrupted.