Grocery Industry Competition Bill

I present a legislative statement on the Grocery Industry Competition Bill.

ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website.

Thank you, Madam Speaker. I move, That the Grocery Industry Competition Bill be now read a second time.

It’s actually a really momentous day to move this important bill along, in this time when the cost of living is front of mind. I would like to thank the members of the Economic Development, Science and Innovation Committee for their collaborative consideration of the bill, and I would like to acknowledge the chair, Naisi Chen, and of course the former chair, Jamie Strange, who did great work.

The committee’s unanimously reported this bill back to the House, and recommended some amendments which I endorse. But I’d also like to thank the submitters on this bill, who took time to provide comments to the committee, especially over the tight holiday period. The committee received 32 submissions on the bill and heard oral evidence from 12 interested parties. Most of those submitters—it’s really important—supported the bill, including the major players, and I know that many submitters and all of the consumers want the benefits they can get from more competition in the form of better prices and more choices as to where to buy their groceries.

This bill is really needed to benefit consumers by improving competition in the grocery industry. We know from the Commerce Commission’s market study that consumers aren’t getting a fair deal at the checkout due to systemic competition problems in that grocery sector. The sector is dominated by a duopoly of Foodstuffs and Woolworths. Between them, the duopoly are taking home more than $1 million a day in excess profits from the money that consumers spend buying groceries. So that’s an unfair transfer of $1 million a day from consumers to duopoly holders, and that’s not good enough.

This is at a time when food prices are rising faster than inflation and, at the end of 2022, the Consumers Price Index measuring inflation was 7.2 percent, but the food price index was 11.3 percent. So consumers deserve and are going to get a more competitive grocery industry. We’re advancing this bill because we want grocery retailers to genuinely compete against each other to provide consumers with the best price, the best quality and the best range of food. We want to create an environment in which new entrants are not scared off by high barriers to entry or the prospect of unfair use of market players by other players.

We want a sector where the grocery retailers have to give a fair deal, both to consumers and to suppliers. We want a grocery industry that is innovative and provides consumers with clever ways of shopping that save time and effort, and we want a grocery industry where suppliers have more grocery retailers that are interested in stocking their products and selling them to consumers.

So this bill has real impact for everyday consumers—everyday New Zealanders doing their normal weekly shop; buying necessities and making those trade-offs at the checkout. I think about constituents I’ve talked to—Sarah, who talked about the increasing financial strain of cost of living that her grocery shop is causing her. She said it’s not about skipping luxuries any more—it’s not about skipping the ice cream or the treats—it’s about the affordability of good, healthy choices for her food, for her family. That’s why this bill is important.

We need more competition and a fairer playing field to drive prices down. By this Government making these changes, we’re already seeing confidence in other players—like The Warehouse investing in their grocery range and providing a different offering, and other newer internet providers trying to do things a bit differently. I encourage new entrants to the market, and new innovation—just different offerings so that families have choices and can help their families eat well and properly. With this bill going through, we will see more and fairer wholesale agreements in place so that small businesses can compete with the big guys too.

So this Grocery Industry Competition Bill will regulate the grocery industry to benefit consumers by providing a platform for retailers to enter and expand in the grocery industry, and to compete directly with the existing duopoly. The bill will create a grocery commissioner to monitor and regulate the industry and keep the New Zealand public informed of what is happening. The bill will impose new requirements on the duopoly to facilitate commercial agreements for wholesale supply of groceries to other grocery retailers on the same advantageous terms they give their own supermarkets.

The bill will provide a flexible toolkit as a grocery supply backstop to allow the commission or the Government to impose additional regulation if improvement is needed, and it will provide new protections to suppliers such as a grocery supply code to limit the ability of the duopoly to pressure suppliers into accepting contracts that are wholly one-sided. The bill will pave a way for a new dispute resolution scheme to quickly resolve issues that arise.

I’d like to speak to some of the changes made by the select committee. I fully endorse the committee’s recommendation to provide the commission with greater monitoring powers and to clarify the objective of its reporting obligations. This will ensure that New Zealanders have the best information about what is happening in the industry and that the commission will have all the tools it needs to improve competition for consumers. I’ve asked the Commerce Commission to act confidently in exercising its powers across the board, and ensuring that they have the right powers in the grocery sector is critical.

The committee has recommended that the commission should be in charge of making and reviewing the grocery supply code but the Government should continue its work and make the first grocery supply code. It also recommended that the code should be able to regulate businesses that are under the influence of the duopoly, to ensure it protects suppliers.

I endorse these changes. In particular, I think it’s great to have the commission responsible for the grocery supply code in the long term. It will be best placed to ensure that the code achieves what it’s intended to and that it addresses any creative, shall we say, new conduct that may arise.

The Government has undertaken significant work to develop a grocery supply code and this needs to be put into use to make the first code as promptly as possible. Given the importance of the first code and the work that has been done to date, the first code will be drafted by the Government and ongoing responsibility for it will be handed to the commission. We will work very closely with the commission in getting the first code right, but I think it important that the initial rules are created by the Government. This differs slightly from the approach suggested by the select committee, and a supplementary order paper (SOP) will be introduced to make this minor adjustment.

I support the committee’s changes to the wholesale supply regime. In order for the wholesale regime to benefit consumers, it’s clear that wholesale customers need reasonable access to the benefits of scale and efficiency-based discounts or rebates by suppliers. Wholesale customers also need to be able to buy a reasonable range of groceries, either from the duopoly or directly from suppliers.

I note that the wholesale code may now regulate suppliers in the event that they are creating problems that limit retail grocery competition. There are some suppliers that themselves have such market power that they may be able to distort the market. They may be near-monopoly suppliers of some goods or have such brand presence that some people wouldn’t go to a retailer that didn’t stock them. It’s important that a grocery retailer, especially a new entrant, is not hindered from making a competitive offering due to the market power of any given supplier.

This regulation has a civil liability for a supplier contravention, and I think that we’ve struck a fair balance there and one that no reasonable supplier should have any difficulty with. Now that the wholesale supply regime is clearer, I expect that the supermarkets, as well as suppliers and wholesale customers, will do their very best to engage with the reforms for the benefit of consumers.

So the committee’s made some really excellent adjustments and improvements to the bill, especially in that wholesale supplier space, and balanced the views of suppliers, Foodstuffs, Woolworths, and prospective wholesale customers. So thanks to the committee for its efforts.

But this bill and continuing with this bill signals how serious this Government is and how far we will go to see a more competitive market with new grocery retailers, to ensure Kiwis can buy groceries at affordable prices. I think this bill is making real change. The market and the changes to the market that we’re seeing shows that we’re making real change. If the change doesn’t happen, there are more tools in the tool box, and we won’t shy away from continuing down this path if we need to. But, for the time being, this is a massive step forward for New Zealanders—one that this Government is proud to take. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. This has been an interesting bill to have an involvement with and we will be supporting this bill tonight. But I’m going to talk about some of the caveats that we have in terms of our support. But we do agree with the general thrust of this bill, which is about bringing better outcomes for consumers and more product range at prices that are competitive.

It is interesting that this bill has been introduced on the very day that there was a press announcement saying that Countdown’s average food prices have risen 9.5 percent this year. The other suppliers, of course, also have had similar arrangements. That’s not all down to the structural arrangements of the industry, but certainly it is a huge cost to mums and dads who’ve got to look after their families and young kids, and buying the weekly groceries is a huge cost. So it is important we get this correct and appropriate.

I just want to reflect back on the Commerce Commission market study in 2021. The Commerce Commission recognised that there was insufficient competition in the grocery trade and their efforts were towards improving price, quality, and range of groceries for customers. Three big things came out of that report. The first one was the imbalance, as they perceived it, in the bargaining power between the major grocery retailers and many of their suppliers, and this needed to be addressed. And also related to that, there were the Fair Trading Act business-to-business contract term provisions. The second thing was the difficulty of competitors entering the market, particularly around getting access to premises and also to supply, and the third was ensuring fairness to suppliers.

So the result was that there were four crucial recommendations in the report. The first one was to make it easier for competitors to set up and expand. And there are two bits to that. First of all, it was to make changes to the land availability provisions. The Commerce Commission suggested making changes to the council planning laws and also banning restrictive lease covenants—glad to see that both the major grocery retailers are making good progress on it.

The second one was to improve access to wholesale supply. And I’m going to talk more about this shortly; about some of the conditions of that. The second big recommendation was about improving the relationship between retailers and their suppliers, and this involves a mandatory code of conduct and strengthened protections against unfair terms.

The third big thing is to help consumers make more informed decisions. Of course, that’s about display of unit prices when you go to the supermarket and making promotional and pricing practices easier to understand, and also that consumers are aware of the terms of loyalty programmes much more explicitly. And the final thing was better regulation, requiring the establishment of a dedicated regulator and the establishment of a dispute resolution mechanism.

So this bill really picks up on those four big, crunchy areas that the Commerce Commission addressed, and it does address those issues. The first one is that the committee focused very much on the supplier code of conduct. And it is important that there is proper, fair supplier conduct that everyone should be aware of. The big concern—and particularly from National Party members—is that this should be a living document. It shouldn’t be just developed in isolation. So we particularly pushed for a change for it to move, once it’s been initially prepared by the Ministry of Business, Innovation and Employment, to actually be managed and overseen and updated by the Commerce Commission, because the Commerce Commission would be seeing what was happening, real practices happening in real time, and have the ability to update that code of conduct to reflect current practices and not to see it set in stone and only periodically updated. We thought that was a very important thing, and indeed it’s been reflected in the legislation.

The second thing is that with regard to quicker resolution process, we were particularly keen that there was a clear, crisp process to make sure that issues could be resolved quickly. The legislation now picks up the compulsory resolution, through a dispute mechanism, whereby if the dispute is under $5 million, it has to be resolved within 28 working days and factors cannot be taken to a higher court other than in respect of matters of law. The whole intent of this is to make sure that if there are disputes between suppliers and the retailers, they are dealt quickly with and there’s a clear process to do so. And I’m, again, glad that that was picked up in the legislation.

The third thing is around the wholesaling, and I just note there’s no real independent wholesale chain outside of the duopoly supermarkets. And one of the things we were very keen to make sure of is that where we’re allowing, in this bill, for the retailers to move back into wholesaling, it actually captured all the operations, not only their own companies but subsidiary companies and companies that they have an interest in or in fact where they control them. We thought it was a very important aspect.

However, I now want to turn to some of the concerns. The first thing I’m going to say is not covered in the legislation, but we believe it’s absolutely essential that the regulator is someone from the industry who has very specific skills and knowledge of the industry, someone with the appropriate skill set. The terms and the conditions in this bill, which shortly will be an Act, are unlikely to be realised, and it’s very important that the Commerce Commission appoints the correct and appropriate person who is going to be forceful and robust in managing and overseeing this grocery trade.

The second thing we note is that wholesaling is a big risk and the areas that we’re really worried about is that this bill permits—and in fact encourages—supermarkets to move into wholesaling, move out of retailing and extend back into the value chain into wholesaling. So the areas of concern: the prices which the grocery retailers are able to source their own brands—known as “home brands”—are not now, and won’t be, available to other competitors. What the arrangements provide for is that the supermarkets will have to offer, transparently, any other price arrangements with other suppliers—and in some cases they are the same suppliers to their home market or home brands—and make those prices available to competitors. The issue of home brands is they’re normally a cheaper product and a competitor product to branded products, yet the pricing is not available to other competitors who may want to enter the market.

The second thing is the potential loss of independent market places in determining what the price of a product is. And, for example, in the fresh produce market, traditionally you had markets like in Mount Wellington where there’s an open market and people bid openly for products. Now what’s increasingly happening is a lot of the trading of products is on an online basis and no one has visibility around it other than the retailers themselves who have all the knowledge and the suppliers don’t see and don’t have access to all that information. We want to make sure that a move to tendering to where this retailer has access to all the market information is appropriate and ensures that there is an element of transparency over time.

The third thing is that the wholesale supplier logistics are a natural evolution as the major grocery chains move into wholesaling, but, of course, they want to manage the logistics of that. We are cognisant that Foodstuffs North Island made clear that suppliers can supply directly to individual supermarkets, but this is not necessarily the case across the whole industry. And whilst we understand there is significant cost in managing and establishing logistics, we’d be concerned if retailers propose excessive cost-to-serve fees on suppliers. They need to be reasonable, and in some cases there’s an issue of whether in fact the supermarket should bear that cost rather than the supplier at all.

The fourth one is retailing. With the move to supermarkets increasingly controlling the logistics chain, we would also be concerned if there were constraints around the merchandising of those things. Finally, there is the issue of the regulatory backstop. The bill assumes that the only answer if these measures fail is more regulation. We don’t think that’s the case. We think that the bill should provide the Minister with other options to look at regulating the industry, and in fact maybe curtailing certain aspects of the grocery trade. We will support the bill, but we do have some concerns.

I am so excited for this speech. Finally, we’re at the second reading of the Grocery Industry Competition Bill. This whole entire recess, I couldn’t help but keep talking to New Zealanders that I had met on my journey over the last three weeks about this bill, because this is a game-changer bill. This is a bill that will radically change the way the grocery sector will be organised.

Can I just first start by putting on record my thanks to the members opposite for their work in the Economic Development, Science and Innovation Committee. During our whole entire select committee process, we had been very collaborative in the way that we dealt with some of the really meaty issues, which were actually covered, probably, by Andrew Bayly in his speech, so I won’t traverse all of the issues that we had talked about. However, there are some things I do want to highlight. In our grocery sector right now, there is a supply chain issue. I went into Central Otago, and met with some of the farmers, some of the beef and sheep farmers, and they said to me that the prices they were getting weren’t changing but then, at the same time, in the supermarkets it was getting more and more expensive. They were asking me, “Where did the money go?” They weren’t getting it at the farm gate. I just had to say to them, “Well, according to the Commerce Commission investigation we had done last year, which has been completed, supermarkets earn an excess profit of $1 million - plus per day.” I just really want to make sure that New Zealanders know this is the place we started on this whole entire journey. There is a trifecta of legislation to regulate the grocery industry, and we wanted to make sure that every single New Zealander gets a fair deal at the checkout.

During the select committee process, we heard people from the industry, including people who were almost victims of supermarkets, in the sense that, for instance, supermarkets were buying out the cold chain transport infrastructure. They were able to charge people for promotion at the end of each aisle when it’s a sale—they charge people extra. So it’s not just about unit pricing. So the fact is that we’ve now instigated a grocery sector commissioner, which is possible in this bill by being able to put in those legislative anticipations. That is why I commend this bill to the House.

Thank you, Madam Speaker. There is quite a bit to agree with the Minister on in his second reading speech. There are systemic issues in the sector, and it has been created by what is generally agreed to be a lack of competition in the grocery market. And I agree with him when he says we do need to be more competitive and have an even playing field.

But I think it’s worth bearing in mind why we are where we are. And that is because we have a duopoly, and we have a duopoly because the Commerce Commission, under the previous Labour Government 22 years ago, allowed the purchase of Woolworths by Progressive Enterprises Ltd in what I thought then—and continue to maintain—was one of the dumbest decisions ever made by the Commerce Commission. They’ve made a few in that time—the purchase by Southern Cross Healthcare of Aon Insurance for medical insurance also substantially reduced competition in that market. But competition exists because there are more players, not fewer. That’s why we have the Commerce Act. Actually, the Commerce Act has, in my view, endured for many, many years—37-odd years since it was passed—and those key points on restriction of competition, sections 27 and 36, I think, are pretty enduring and well written. But what it needs is a competition watchdog with teeth. And I have to say, in my experience—and certainly we’re talking nearly a generation ago—there were decisions that were made that in large part led to the situation we find ourselves in. And it’s easy to see when we compare ourselves with other OECD countries. There is a very, very high correlation between the number of players in the grocery market and the extent of competition in those markets.

And we are in an inflationary environment. It’s not only for that reason. We’ve had weather events that have caused seasonal supplies to grow in cost and therefore price. We are in the middle of an inflationary cycle that I attribute much of Government decision-making to, and that’s not controllable necessarily by the grocery markets. But had we had more competition, then we may not have had the degree of inflation in our groceries that we are seeing.

But the Minister talked about tools in the toolbox as if one can hammer markets into submission, that they can regulate them into lower prices. And we’ll see, because this bill will pass, and it will pass with the support of the National Party, but I do have serious concerns about the degree to which this will have any material beneficial effect until we broaden competition.

💬 Damien Smith: Why pass it, then?

That’s a very good question, Mr Smith, and it’s one that my party has considered very carefully. And on balance and on the basis that to the degree that there are marginal improvements, we will continue to support this. But I say this: when we get to Government and if we see that this is not working to the degree that it should and the lofty rhetoric that the Minister has just waxed, there will be changes to it, because we need there to be greater competition—in all markets, not just this one.

In terms of anecdotes to stress the degree of market power that some of these players have, I remember some years ago when the previous Government was considering its response to the Law Commission report Alcohol in Our Lives, and one of the things that was being considered at that time was a material increase in alcohol excise as a way of moderating, using price as a signal to moderate behaviour. And I was at a function where a relatively senior member of an organisation in the alcohol industry relayed a conversation that he had had with one of the major players in the grocery sector that said simply this: “If the Government puts an alcohol excise on the price of beer and wine, that cost comes off your margin, not ours, and if you don’t like it, we just won’t stock that product.”

And that was the degree of the strength of the belief of the influence that the grocery sector had on that one supply chain, one product—that if there were cost pressures, then that was just going to be borne by the supplier. Mr Bayly started to touch on margins. I think it’s important to recognise that size has benefits for consumers, potentially, because that purchasing power does enable bulk purchase and lower prices. What I’m not sure is happening is whether or not the consumer ultimately benefits when there’s only two or three major players in the market. Indeed, the committee—of which I wasn’t a member when the submissions were being heard; I was a bit of a tail-end Charlie, coming on to the Economic Development, Science and Innovation Committee—looked very carefully at some of the frameworks for wholesaling in that supply chain. I think that supplier code is going to be very important as it relates to the degree of transparency about margin management, and I’ll be watching that very, very closely.

I think the other thing that we heard—not so much during the consideration of the bill, but it was certainly an issue that was raised in the context of the Commerce Commission’s work before they published their final report, and that was the extent to which we make it harder for overseas investors to introduce grocery chains into New Zealand. I think the Overseas Investment Act and the Overseas Investment Office may be a barrier to increasing competition. The very thing that we are trying to do is actually being prevented by what I believe to be overly restrictive barriers in place on foreign investment into a number of sectors, but certainly this one. When you’re thinking about some of the big international chains like ALDI, like Costco, they’ve had a look at New Zealand and it’s simply just too hard for them at the moment. One of the litmus tests of the effectiveness of this bill, when passed, is going to be the degree to which those major global chains suddenly see New Zealand as a more attractive destination to invest. If they don’t, or if they can’t, then we will fail to achieve the lofty goals that the Minister set out: more competition and an even playing field.

The areas, again, that Mr Bayly did mention and that I think are going to be as effective as anything that we’re doing in this bill are certainly the removal—and, indeed, it is happening voluntarily now, I think. Supermarket chains may have seen the writing on the wall in respect of land acquisition covenants and restrictive lease covenants. They are simply barriers to competition. I think we’ve all got stories of examples in electorates up and down the country where the Resource Management Act was, frankly, used as a tool to delay and deny and defer and deflect the ability of competition to come in to the market. It’s certainly been the case that I could think of in two areas that I know very well, Dunedin and Central Otago. Thankfully, tenacity prevailed, but it shouldn’t have to. This is one of those areas where we actually encourage and welcome the sorts of competitive endeavour that will, I hope, be improved by this.

The last thing I would say—and I think I’ll just come back to the grocery supply code—is that sunlight is such a great disinfectant. One of the things that I think the supply code needs to do is to highlight the degree to which there are elements of pure competition versus pure collusion. One of the things that commodity products like oil, like petrol, for example, and to some degree groceries—because they are the same product being sold in two different places; two, three, or four different places—is that absolute competition moves in the same way as a collusive environment and it’s really hard to tell the difference. When Z change their price up or down 10c a litre, suddenly BP do the same. Why is that? Because of competition or collusion? Well, we’d like to think it’s because of competition—that there aren’t phone calls going on in the background. One of the things the grocery code, I think, will enable the commissioner to do is to actually highlight and shine a light and make more transparent the practices that go on in terms of price setting and margin management. So with a reasonable amount of caveats, we’ll continue to support this bill at second reading.

Thank you, Madam Speaker, for the opportunity to take a short call in relation to this very significant bill. I just want to start by acknowledging Mr Woodhouse—I often enjoy his contributions to the House because they do reflect a lot on decision making and the history of decision making, which I do think is important for us to consider. He did say that it was too hard for Costco to exist in New Zealand. But Mr Woodhouse, you’re very welcome to come to the northwest and I will give you a tour; it is a wonderful part of our community.

But I think I wanted to carry on the same tone as Mr Woodhouse and reflect on history. One of my most vivid memories as a child was walking into Big Fresh—whether it was the giant grinning pear or the dancing broccoli, fruit and veggies took on a distinctly appealing sense in those days. And I’m not alone. Many of us, as children, were used to walking into a Foodtown or a Big Fresh, a Write Price, or a Price Chopper. And Mr Woodhouse is quite correct that in the 1980s and 1990s there were a series of mergers and acquisitions which led to Woolworths—well, what is now Woolworths—purchasing Foodtown, and that left us with basically just one brand standing. And as Consumer NZ’s Jon Duffy has said, “That was the beginning of the end, that was the beginning of the status quo, which is New Zealand’s grocery sector being served by a duopoly.” And since then, I think what has been equally alarming is the vertical integration, and so what that means is one entity controlling every element of the supply chain. Again, Jon Duffy says it beautifully; he said, “Right from the moment a fish is caught through to the moment it is scanned at the checkout, that’s fully owned, in one case, by one entity. When you own the entire supply chain it makes it a lot easier to control the prices that are charged through that supply chain”, and that’s why we end up with higher prices.

This is a Government that is addressing that. We’ve already introduced legislation to ban restrictive land covenants, and this bill will introduce a number of further changes, including—as members have spoken to—the grocery commissioner, which means that we won’t just be floating in a space where we don’t understand what the implications are of our duopoly. We will know. There will be reviews every year, and we’ll also be imposing obligations on the major grocery retailers through the wholesale supply regime. And that will—as Mr Woodhouse rightly identified an issue—make it easier for foreign companies to come into New Zealand and enter the grocery market. This is a bill that is literally about bread and butter issues. It’s about making basic goods more affordable for Kiwis, and I commend it to the House.

Thank you, Madam Speaker. I rise on behalf of the Greens to speak to the second reading of the Grocery Industry Competition Bill. I just wanted to, first and foremost, acknowledge the Economic Development, Science and Innovation Committee for their very chunky report and the substantive amendments that they have provided.

The Greens supported this bill at first reading because we’ve always stood for enacting laws that support fair trade, fair food prices, and local sourcing and we do think that this bill goes some way towards that. Personally, I want to dream of a world beyond just reforming capitalism, but I want to acknowledge that the supermarket industry is absolutely broken and the duopoly hasn’t served us. It has created the conditions where ordinary people are being ripped off at the counter. A big part of this is around lack of regulations to enable fair trading and a better balance between the retailers and the suppliers. So we welcome the introduction of, say, the grocery supply code, which will be mandatory for major grocery retailers. And we acknowledge the changes that were made by the select committee—for example, switching the power to make the code from the Governor-General to the Commerce Commission. I think this is a good change and it’s kind of where it should be.

There are other changes as well, where we’ll introduce a dispute resolution scheme for the grocery industry, as well as extending the protections in the Fair Trading Act to cover the relationship between major grocery retailers and their suppliers. Ultimately, what we hope this bill will do is deliver fair prices for consumers. And, yes, I acknowledge the National Party’s comments that perhaps some of those changes are yet to be seen at the extent, but I think no one in this House will be thinking that this bill is a silver bullet to address cost of living pressures. It is a necessary reform to address what has been longstanding, unfair competition, and the member who spoke previous to me, Vanushi Walters, talked about some of the history in that regard. I too want to acknowledge Consumer New Zealand’s strong advocacy on this to get major changes through. And so it is good the Government has listened to some of that advocacy as well.

As was said by other members who argue that the effect will be truly seen, I think this is why, from the Greens’ perspective, we’ll be needing further investment in urban food gardens, papa kāinga, and other initiatives to provide alternatives to supermarkets. So we look forward to the Government enacting this bill and for other holistic approaches to be brought forward so that everyone has access to an abundance of kai. Kia ora.

Thank you, Madam Speaker. I rise on behalf of the ACT Party on the Grocery Industry Competition Bill, and this was the day for Mr Duncan Webb, as the new Minister of Commerce and Consumer Affairs, to roar like a lion through this industry, because that’s what it would take to actually increase competition. He had the opportunity, instead of choosing regulation, to actually understand what competition is in this sector, and he hasn’t had the ability tonight to discuss supermarkets and how they should actually be interacting with new entrants to come into this country.

At the moment, let’s take the bill as it exists and the bills that have passed, and if you take the supermarket that already exists, they have removed all restrictive covenants, they’ve already calculated and displayed unit pricing—they’ve gone digital with that. They’ve created a wholesale business unit and they’ve signed agreements with customers, and they’re working to the code of conduct and they’re actually working to the Grocery Commissioner’s vision. So that’s what happening, but it’s not actually creating any competition.

ACT has actively been following the Commerce Commission’s market study process investigating retail grocery competition. We keenly support, as a party, measures that would facilitate greater competition in this sector by lifting barriers to entry, which leads to customer benefits via pricing and choice over the long term, and that’s what’s missing from Labour’s vision and the Green Party’s vision. In 20 years’ time, will we actually have a new supermarket chain in this country? That’s a question to think about, and when Naisi Chen is popping down in 20 years’ time to get noodles for her party, or James Shaw and Ricardo Menéndez March are popping down to get a nice, juicy steak with a bottle of Pinot noir, will they actually be in another supermarket chain, or will it be just the same ones? I would argue that it would be the same ones, given the fact that at the moment there are so many barriers to entry in this country.

ACT opposes this bill on the ground that for a new international grocery to enter the New Zealand market at any reasonable scale, this is just not helped by this bill. The National Party needs to have a look at this and address the fact that at least regulation—currently not excluding zoning rules and consenting processes—make it so close to impossible that it might as well have actually been legislation founded to stop competition in this country.

So ACT has disagreed with the Commerce Commission’s draft report. There were flaws in its analysis and opportunities earlier on to strengthen competition by focusing on easing regulatory and legislative barriers to entry—matters noted in chapter six of that report. But in backing a New Zealand initiative, ACT warmly welcomed the commission’s final report focused on easing regulatory barriers to entry, which actually said that unless structural change occurred in the industry, there would be no new competition introduced to New Zealand.

The grocery industry bill revisits matters that were less favoured in the Commerce Commission’s final report while ignoring measures more fundamental to enable real entry. Worse, the bill’s recommendations will actively discourage entry by international grocers while potentially running afoul of international trade agreements. We urge that the bill be withdrawn or rewritten in favour of measures recommended by the Commerce Commission that will mitigate real barriers to entry and enable greater competition. If the Government does not recommend that the bill be withdrawn, it must at least make or recommend changes to the bill that might reduce some of the worst harms it will otherwise cause.

Tex Edwards said that there’s a level of fantasy surrounding this bill, and I think he’s right. His view is that only a breakup of the two supermarket groups would needed to entice a third like-for-like challenger, and this could bring down grocery prices. But, actually, it’s more sophisticated than that. To get a Lidl or another supermarket chain here involves a complete strategy by the Overseas Investment Office and the Government to be friendly and open for these businesses to come here. And I’ll point out a few barriers in entry to that actually happening.

Relatively few sites in New Zealand are sold for use in grocery retail. Organic growth on sites is already happening because the institutions that are the existing supermarkets have already got their hands on that. Then, you move on to local councils where city planning and zoning has intended to set zoning to accommodate the number of grocers that planners believe its neighbourhoods might need, rather than the numbers that might enable effective competition. In doing so, they’re effectively and invariably creating conditions enabling local monopolies. And that’s the issue when you drive your car down the road: who is in that area? Is it a monopoly? Is it competitive?

New Zealand’s planning system considers competition as a harm to be mitigated rather than a boon to be encouraged. If resource consents can be secured, a full-service grocer will also need to seek an alcohol licence. They can expect opposition from the local health officials, the police, community groups, and the Green Party. Is it actually possible for a potential international entrant, due to regulation and market structure, to set up here?

This was a day for Mr Webb to at least open the door to go back to the drawing board and emphasise easing zoning and consenting barriers against entry. Why can’t he turn around and tell Land Information New Zealand (LINZ), which operates the Overseas Investment Office, that entrance for retail grocery chains is in the national interest? In a period of cost of living crisis, this Government has moved as slow as Mr Robertson in a lamington race on a big spoon. We have now a situation where food prices are actually inflationary, and margins by the grocery supermarkets have remained the same—so inflation has been caused by another route here. Otherwise, an international applicant would see the Overseas Investment Office, which I do in a lot of cases, as a source of potential risk.

The breakup of cartels of existing connected property owners, who collude with councils to set anti-competitive zoning rules to frustrate entry in their local areas, is a must as well. So the Government must ask itself, LINZ, and the Commerce Commission to give a clear line to entry without interference. We also urge that the Economic Development, Science and Innovation Committee seeks input from the Ministry of Foreign Affairs and Trade (MFAT) on potential trade implications on this bill. Australia simply could raise Government-to-Government concerns for one of the supermarkets that is Australian-owned. I don’t think anybody’s thought about that at the committee. And should the United States succeed with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Costco’s potential inclusion as a regular grocer could also create issues that would make already difficult negotiations trickier.

Finally, and more substantively, the compulsory wholesale access regime, as described in the legislation, would make it incredibly risky for new entrants, and new entrants should not be bound by this mechanism. It’s a new barrier to entry, and Dr Webb has taken a communist view that this is a good thing, and it’s not. So, then, we may—may—get a third New Zealand - wide player with market power, leading to competition and reduced prices.

Intended measures proposed in this bill risk increasing the cost to grocery consumers. Compulsory wholesale access regimes are particularly risky, and the Commerce Commission recommended against them. So ACT urges the Government to take up measures to reduce barriers to potential entry in the draft Natural and Built Environment Bill and the Spatial Planning Bill, to instruct the Overseas Investment Office to approve grocery applications involving retail grocery, and to consult with MFAT on potential trade implications and other options that won’t do much harm.

I’m going make a prediction today: a new entrant, if they can get the right to set up locations, will easily have over $100 million capital tied up in sites it’s purchased, with having no clue when it might actually be possible to start building grocery stores. Try planning a distribution network when you can’t tell when different stores might be allowed to open. So the Overseas Investment Office has its hurdles, and if you have more than a trivial amount of foreign backing and you want full-service stores, you need to get a liquor licence and permits and process. So it’s hardly a surprise that international retailers like ALDI and Lidl have decided New Zealand is not worth the pain. Costco is a different business model, with three new sites, but it’s a not a full-service proposition.

So we’ve asked the Minister to put a stop on this bill. And we’ve asked the committee—even with the job it’s done, it hasn’t done the job of providing long-term benefits over the 20-year view. And I guarantee you, we will be going to the same supermarkets unless we change those things. So the ACT Party opposes this bill. We encourage everybody to oppose this bill and to create trading environments where businesses can participate with confidence and have a positive effect over 20 years towards reducing prices or maintaining stability for the New Zealand consumer.

Thank you, Madam Speaker. It’s a pleasure to take a call tonight on the Grocery Industry Competition Bill. This is a bill whose time has come. It will be no surprise to any New Zealander that Kiwis pay far too much at the supermarket. Many of us have travelled across the Ditch or have family in Australia who remind us regularly—and I must say regularly—just how much more we pay for food at the checkout, especially when compared to our Aussie cousins.

In my view, it is quite outrageous that there are some goods that are made or grown here in New Zealand that are cheaper to buy overseas than here in New Zealand. That is one of the issues that this bill seeks to address.

I’ve spoken a number of times in this House about the supermarket duopoly we have in New Zealand. The Australian-owned Countdown chain and the New Zealand cooperative Foodstuffs and their major chains, Pak ’N Save and New World. This duopoly hurts everyone who participates in the market, it hurts suppliers who don’t receive fair prices for their goods, it hurts consumers who pay too much, and from my experience as a union organiser in this sector, it hurts workers, many of whom don’t earn as much as they should from working in a supermarket in New Zealand.

The high cost of food in New Zealand hurts our most vulnerable. When we have a situation where people on low and middle incomes can’t afford to buy New Zealand butter, milk, and cheese or New Zealand - grown fruit and vegetables, we have a problem that we need to fix. This bill will help to fix this by taking further steps to allow new entrants into the market because that is how we create more competition, end this duopoly, and bring down prices for consumers.

One of the key measures that this bill does to address that is to impose obligations on our major grocery retailers through the wholesale supply regime. One of the issues we have is that our supermarket duopolies and our chains not only control the retailer but they control the wholesale food price that distributes to that retailer. And this bill makes changes to that regime which will increase competition, allow new entrants into the market, and ultimately bring down prices.

As I said, this bill is one that has been a long time coming. As the MP for Nelson, I’m regularly asked “What is this Government doing to end the high food prices that we have in supermarkets?” And it’s a pleasure to be able to speak tonight on one of the measures that we are taking to do just that. With the current cost of living and high inflation challenges we have in New Zealand, this bill could not come at a better time, and I commend it to the House.

Tama Potaka, five minutes.

Ngā mihi manahau o te pō roa nei. [Good evening during this very long night.] Great to see the people from Waikato here today. I’ve heard some views tonight—some were balanced, some may be competitive in the “Hyperbole Olympics”, but I don’t want to get too enthusiastic, lest I get a medal in those games. Now, when I was a little man in Rangitīkei, our food source, our groceries, were grown outside or running around the window, and long may that last. There was the ability to grow and catch your own kai from the awa or ngahere, from the farm, or from the māra kai, or the veggie garden. Rakiraki, or ducks—paradise or mallard—were on the menu in May. No kererū, though. We used to go to the grocer once a week to what we described as Auckland food, like kedgeree and watermelons.

The supermarkets and grocery industry generates many diverse perspectives. Some view the industry with pride, as it creates a proven pathway to individual and corporate wealth and wellbeing, and provides produce and other goods for the masses. There have been some outstanding role models, people like Jason Witehira, who have worked hard to own shops and franchises—he’s now across the other side of the Harbour Bridge. They’ve demonstrated excellence and innovation by taking on produce from all over the world, but also from all over the country—unusual places like Te Tairāwhiti, out in the regions and giving new suppliers a chance.

Others—in fact, many others—view the industry with some scepticism, considering it uncompetitive and making it harder for Kiwis through pricing, and in the case of the hard-working people of Nawton and Hamilton West, they’re actually shutting down Countdown Nawton this August, the only mainstream supermarket in that suburb. What a consumer calamity for those people, most of whom probably prefer utes over Teslas, and some who cannot even drive to Countdown Dinsdale or Te Rapa because they have no waka at all.

This bill is geared to improve competition and efficiency in the industry for the long-term benefit of consumers and to tautoko a trading environment where businesses can participate confidently. As a result, our party does support this bill, albeit with caution—he mea whakatūpato, e hoa mā. [with caution, dear friends.]

Whilst we tautoko the view that proposed changes like the code of conduct and the Grocery Commissioner will increase competition, the impact of the changes on the food prices will be inconsequential, particularly given the severe cost of living crisis facilitated in the current climate. Poorly constructed policies, suboptimal spending, Resource Management Act settings, employer-employees settings, more taxes, and deleterious regulatory barriers to overseas market entry all conspire to cause the fundamental problems we face. On top of these unconstructive factors, we have witnessed extraordinary monetary interventions that have gone a step too far, causing price rises, and this bill has indeed landed beyond some of the Commerce Commission recommendations.

The heavy-handed approach with the regulated grocery retailers echoed the Ministry of Business, Innovation and Employment (MBIE), who warned that introducing a mandatory wholesale access regime could create “a disproportionate intervention with highly uncertain consequences, including the risk of disrupting significant efficiencies and introducing costs that could be passed onto consumers.”

The idea of a forced sale of supermarket assets is also poorly thought-through. Forced divestment of private assets reminds me of decades of underwhelming treatment levelled against some fellow Kiwi landowners. It impacts on market confidence and needs no such provision here.

Duress is something that people in Waikato and Hamilton West have faced over time and continue to face regularly with food prices, and they would be very open to seeing supermarkets such as Costco and Aldi being able to enter New Zealand far more easily. In fact, I’d love Costco to come to Hamilton West, once we have better roading in and around that great electorate, the home of the best rugby team in the Anzac countries.

The overseas investment framework does need tweaking further to fast-track greater and deeper provision of grocery goods to our communities. Not unlike other legislation proposed in my short time in service in this House, the Government presumes regulation to be the only genuine answer to facilitate wholesaling, and we disagree. Why let the supply code be delivered and overseen by MBIE when we could have had the commissioner update and oversee their code? We sought a binding dispute resolution process, and still consider that it is more appropriate for both the retailer and supplier to initiate those claims.

I tautoko the wisdom, the innate and elderly wisdom of my colleagues sitting here, and support with caution, and I look forward to how this legislation can encourage a grocer to replace Countdown Nawton, come August, and support the hard-working people of Hamilton West, the best place to grow up and grow old, New Zealand.

Thank you, Madam Speaker and thank you for the opportunity. I first want to acknowledge the Minister of Commerce and Consumer Affairs, the Hon Dr Duncan Webb, because I know that he is particularly passionate about this, as we’ve heard earlier on. I also want to acknowledge the work of the Economic Development, Science and Innovation Committee, because I remember them being very passionate about this landing on their table as they thought about the opportunities that it provided them to make a step in the right direction.

I think we have to always remember that at the heart of this bill is the fact that the Commerce Commission found that New Zealand supermarkets make in excess of $1 million in extra profits, over and above what we’d expect if there was appropriate competition.

This bill, as other contributors have mentioned earlier, acknowledges that you can’t run a supermarket on empty shelves. It gives a leg-up to the likes of those smaller retailers, those smaller players in the market, to give them a hand in terms of that competing on an equal footing and to do something about that duopoly. It also means that other retailers will be able to sell a wider range of groceries at better prices.

For those reasons, I think this bill is a really good idea. I think it does something tangible and something really important for every day New Zealanders, and I commend it to the House.

Thank you, Madam Speaker. [Interruption] I’d like to acknowledge the enthusiasm on the other side of the House at 10 minutes to 10 this evening. I would also like to acknowledge my fellow MP from Hamilton and commend him on how many times he fitted the word Hamilton into his speech. I think the member set a new record there. I won’t try and challenge that one, but it also looks like another record’s been set, as the member acknowledged the rugby field with the Waikato Chiefs. But I turn my attention to the bill—the Grocery Industry Competition Bill.

I’d also like to commend the Minister of Commerce and Consumer Affairs, the Hon Dr Duncan Webb, for bringing this bill to the House—well, the previous Minister, the Hon Dr David Clark, initially brought this bill to the House, and at the time I was the chair of the Economic Development, Science and Innovation Committee. I was very pleased to see this bill introduced to the House and to see this bill come to the committee because there is no doubt—and there does seem to be broad agreement right across this House—that food prices are too high. They are unsustainably high. And I would like to acknowledge the support of the National Party opposite, who support this bill, with their reservations, as they say, but nevertheless support this bill because they know as well that food prices are too high. And I’m proud to be part of a Government who is doing something about that.

We do have a small market here in New Zealand. And the reality is that small markets are prone to a lack of competition, which often means that a Government needs to step in in order to promote that competition. We all bemoan the fact that we only have two main supermarket chains here in New Zealand. We have one Costco store, I believe. The reality is it’d be great if we had 50 Costco stores here in New Zealand. Not just Costco—other stores. We do have examples of that in Australia. I was recently in Australia and I did take interest in the prices over there. And the reason Australia has lower prices is primarily because of the competition that we don’t have in the market.

But this bill will promote that competition. This is the second reading of the bill. We heard from submitters—I’ll just mention one submitter that sort of stuck in my mind. It was a gentleman who owned a small dairy. And when he had to buy food for his dairy, he had to go to the wholesaler—the wholesaler was owned by one of the duopoly—and, basically, they dictated the prices to him in terms of what he had to pay for the products. So many of us have been to a corner dairy and thought, “Why are these prices so high?” Well, one of the reasons is because they actually can’t get the equivalent prices that the supermarkets get. Now, this dairy owner, if he goes directly to the producer, then the producer will go, “Well, what do I do? Do I give you the product or do I stay in with the duopoly? Do I risk being ostracised by the duopoly?” So there are serious power imbalances all over the place here.

I think I’ve probably articulated enough there—I’m looking to my left and I think we’ll finish there. I certainly commend this bill to the House. Thank you, Madam Speaker.

Thank you very much, Madam Chair—an absolute pleasure to rise on the—

ASSISTANT SPEAKER (Hon Jacqui Dean): “Madam Speaker” will do.

—second reading of the Grocery Industry Competition Bill. It’s interesting—I just acknowledge the last speaker’s contribution in terms of this important topic, in articulating that good example about that dairy owner. I was thinking the only thing that dairy owners in this country are worried about is when the next ram raid is going to happen for them, sadly. That is the reality, but I love that little articulation of the dilemma of trying to get goods from a producer or going direct to the duopoly.

But the reality is that the cost of this Government is driving up the cost of living. That is the simple fact. We can all talk about the implications of the grocery chains driving up food prices—it’s absolute bollocks, right? This Government, and this Labour Government’s policies, are the reasons why we’ve got a cost of living crisis, so don’t fall for this little distraction that it’s the big, bad grocery organisations that are causing all of our problems—oh, no, no. Of course, that sounds good on paper. Next they’ll say it’s Air New Zealand, or next they’ll say it’s another big monopoly, a petrol company—surely not, surely not. No, the reality is quite simple: it’s this Labour Government’s policies that are driving up the cost of living—12.1 percent is the increase in food prices, according to Statistics New Zealand, and a large contributor of that was grocery prices. A 12.1 percent increase from this time last year is a massive jump. But, again, that is driven by policies set by this Government.

The other thing I heard as well this evening is about the million dollars of extra profits. I think one of the speakers said that—who was it? I can’t recall, but it was one of them on the other side. Well, do you remember when the Government locked down and said the only place where Kiwis could buy their groceries is the supermarkets? Do you remember that? I remember that. And do you know what would happen when you shut out all the other providers—all the butchers, all the bakers, all the small fruit shops? Do you wonder what would happen? You don’t have to be an accountant to work this out. Well, I’ll tell you what will happen. It’ll mean that those grocery chains get all the business, right? Everyone goes and shops there.

💬 Hon Mark Mitchell: Yeah.

So I ask the Hon Mark Mitchell: what happens to their profits? They go up, don’t they? And I tell you what: they’re on that side saying, “Oh, the grocery chains are making a million dollars a day.” Well it’s because of their policies—that’s why the grocery chains saw an increase in their profitability. So I think we’ve just got to get a little bit back to basics in regards to this.

While National will be supporting this, this isn’t going to solve all the problems around competition within the grocery sector. That is mythical thinking. The Minister was in La-La Land, as he usually is. But don’t worry: his runway is running out pretty rapidly, and he can find something else to do beyond October. We’ll be supporting this bill. Just looking at the time, we will be making sure that it’s going through, but we do have reservations. We’ll be commending this bill to the House.

Kia ora, Madam Speaker. It’s lovely to rise and take a call on this piece of legislation. I didn’t quite understand everything that the previous speaker, Simon Watts, was saying because it just seemed like the usual rah rah that would go on from that side of the House. We do have support on this tonight. I’m glad to have worked alongside our new Minister of Commerce and Consumer Affairs, the Hon Duncan Webb, and obviously being a member and being a keen, engaged member of the Economic Development, Science and Innovation Committee, it was a pleasure to be on there—

💬 Andrew Bayly: Very keen—very keen.

Measured and thoughtful there, Mr Bayly. Always considered in what goes on.

This is good legislation. This is legislation that is going to be transformational for people in New Zealand. Communities like mine in Marfell, in New Plymouth, will benefit from this. So I commend this bill to the House.

This bill is set down for committee stage next sitting day. Members, the time has come for me to leave the Chair. The House stands adjourned until 2 p.m. tomorrow.

The House adjourned at 9.59 p.m.