The Act is a direct response to the Commerce Commission's market study into the grocery sector
The provisions in the Grocery Industry Competition Act 2023 have been enacted as of 10 July.
The Act, first introduced in December 2022, served as a direct response to the market study into the grocery sector conducted by the Commerce Commission. It involves a regulatory regime for grocery retailers to promote competition and efficiency that will benefit consumers in the long run.
“We want New Zealanders to benefit from more competitive prices and more choice when they buy their groceries.” Pierre van Heerden, grocery commissioner, said in an open letter to the grocery sector.
What are the key measures in the Act?
The Act gives new duties to regulated grocery retailers (RGRs) when it comes to grocery suppliers and wholesale customers. The RGRs designated by the Act are Foodstuffs North Island, Foodstuffs South Island, and Woolworths New Zealand.
“We expect retailers will face more pressure to compete on price, quality, and range to satisfy diverse consumer preferences.” said van Heerden.
RGRs will be required to comply with a Grocery Supply Code of Conduct which imposes obligations that aim to mitigate the bargaining power imbalance between suppliers and major retailers.
The Act also imposes duties on RGRs regarding the facilitation of wholesale supply agreements. This includes taking wholesale supply requests from other grocery retailers into consideration, establishing rules, criteria, and process for considering wholesale supply requests, and establishing terms and conditions as well as principles for wholesale supply.
RGRs are also not allowed to engage in conduct whose purpose or effect likely prevents a wholesale customer from receiving the benefits of volume or scale-based payments, discounts, or rebates from a supplier. This provision was to address the inequality between the RGRs and smaller retailers in accessing goods from suppliers.
The existing unfair contract terms regime in the Fair Trading Act 1986 (FTA) was expanded to standard form grocery supply contracts. These contracts will only be subject to the regime if it fits the following criteria:
- each party is engaged in trade;
- it is not a consumer contract;
- it is a contract between a regulated retailer and a supplier;
- it relates to the acquisition of goods in respect of which the end-user is a consumer; and
- it does not comprise or form part of a trading relationship that exceeds the annual value threshold of NZD1 million when the relationship first arises.
Grocery suppliers are also able to seek a declaration should they find that a term within the standard form grocery supply contract is unfair, an ability that was previously exclusive only to the Commission.
What happens if RGRs fail to comply?
If RGRs do not comply with their designated duties, suppliers and wholesale customers are granted access to the range of remedies under the Act.
They can also refer certain disputes to the alternative dispute resolution scheme. This is an out-of-Court dispute resolution scheme that is meant to resolve conflicts between the aforementioned parties. However, this is yet to be established as it still awaits approval from the Minister and confirmation regarding the designated scheme provider.
The Commerce Commission can also penalise to those who violate any provision in the Act.
