The supermarket industry is to be investigated by the Commerce Commission, the decision closely follows its $78,000 fine of Pak’nSave Mangere for pricing irregularities.
Consumer NZ chief executive Jon Duffy said his organisation had been campaigning for an investigation into the supermarket sector and the announcement was good news for shoppers.
“New Zealand has one of the most concentrated supermarket industries in the world, dominated by two players. When you’ve got a market like this, there’s a big risk that consumers will end up paying higher prices because the usual competitive pressures don’t apply,” Duffy said.
Despite the high degree of concentration, the industry hadn’t been subject to any significant scrutiny from regulators.
“We need a wide-ranging investigation to gauge the degree to which the stores’ market power is affecting how much consumers pay,” he said.
Consumer NZ wanted the investigation not only to look at supermarkets’ contracts with their suppliers, but also the stores’ pricing practices and promotion of their private label brands. Private labels – the supermarkets’ own brands – offer the stores’ higher returns but mean other brands can be pushed off shop shelves.
“Supermarkets have a huge influence on the food supply chain, from the farm gate to the dinner table. Their practices not only affect what choices are available to consumers – and which brands end up on shop shelves – but also what we pay at the checkout. Consumers have the right to know whether this market power is being misused.”
In September, Consumer NZ made a complaint to the commission asking it to use its market study powers to investigate levels of competition in the industry. It also asked the commission to investigate supermarkets’ price promotions.
“The stores employ a confusing array of price promotions, which risk misleading consumers about the discount they may be getting. Based on our research, we think there are good grounds to question whether some of these discounts are genuine.”
The commission is required to complete its market study by 23 November 2021.