ComCom testing if supply code ‘rule book’ is helping fix power imbalance in groceries

In calling for views, Pierre van Heerden says that this review is crucial to make sure the Code that came into effect in September last year is operating as intended, and to identify the best way forward for continued and increased effectiveness.

New Zealand’s mandatory Grocery Supply Code was introduced under the Grocery Industry Competition Act (GICA). The Code was created to increase transparency and certainty for suppliers through a set of rules supermarkets need to follow when dealing with suppliers. Bringing increased certainty to agreements between supermarkets and suppliers would give suppliers more confidence to innovate and invest in more choice for consumers. 

Mr van Heerden says “an ongoing power imbalance and lack of trust between suppliers and grocery retailers will ultimately undermine all of the other initiatives intended to deliver a well-functioning and competitive grocery market.” 

“I want to make sure that we hear from suppliers, retailers, and any other industry players early in the review process to help shape the scope and direction of the review, which is why I’m opening consultation with enough time to identify the key issues and opportunities and explore changes to the Code if needed.”

“Through this review we’ll consider the effectiveness of the Code, if there are any areas for improvement, and if the Code needs to be amended, revoked, or replaced.” 

The Commerce Commission’s market study into the grocery sector completed in early 2022 found that many suppliers are reliant on their trade with the main retailers and that grocery retailers were able to transfer costs, risks and uncertainty onto suppliers.

Under the GICA the Commission is required to review the supply code within two years of it coming into force, and has the power to amend, revoke or replace the Code. The Commission is starting the review less than a year after the Code came into effect as there are concerns that systemic issues are not being addressed and suppliers may not be benefiting from the full protections of the Code due to built in carve out provisions. 

It is possible that issues related to the operation and effectiveness of the Code, that are outside the scope of the Commission’s current powers, could also be identified within the review and included in the Commission’s report to the Minister.

Background

The Commission has published a Request for Views paper for consultation with submissions due 16 September 2024 on our website.