The $3.25m penalty is the highest one set down as a result of anti-competitive land covenants
The High Court in Wellington has slapped Foodstuffs North Island with a historic $3.25m fine due to its implementation of anti-competitive land covenants, reported the NZ Herald.
According to the Herald, it is the highest penalty laid down as a result of such covenants. The Commerce Commission confirmed that the High Court set the fine.
The covenants were geared towards minimising competition in the lower North Island area. The Commerce Commission described the co-operative’s actions as "deliberate", with the intention of preventing competitors from launching new stores or growing current ones in Newton and Petone (Wellington), as well as in Tamatea (south of Napier).
The conduct raised significant competition issues and showed an intentional push to obstruct competitors, Justice Paul Radich said in a statement published by the Herald.
“The covenants were of very long duration, up to 99 years, and lodged with the purpose of hindering competitors in local towns and suburbs where consumers buy their groceries”, Commission Chairman John Small said in a statement published by the Herald. “By blocking other supermarkets from opening new stores or expanding existing ones, the covenants hindered competition for Kiwi shoppers”.
An investigation into Foodstuffs North Island’s conduct was initiated following the commission’s market study of the grocery sector, which wrapped up in March 2022. The study revealed that the use of covenants on land or in leases by major retailers was cutting down the number of sites available to competitors.
Recommendations made after the study birthed the Commerce (Grocery Sector Covenants) Amendment Act 2022, which has banned and rendered unenforceable specific grocery-related covenants.
In August 2021, Foodstuffs North Island committed to discontinuing the use of restrictive land covenants and exclusivity clauses in leases. By June 2021, the company had begun a process of identifying and removing such clauses from existing tenancy agreements.
The commission said that in June of this year, the parties had reached a settlement to resolve the proceedings on acceptable terms.
