Are supermarkets and similar outlets selling groceries and items of daily need for household charging fair prices? Are New Zealand consumers getting a fair deal?
These questions and other issues will be addressed by a market study launched by Commerce and Consumer Affairs Minister Dr David Clark today (Tuesday, November 17, 2020).
The Study will be carried out the Wellington based Commerce Commission.
The move follows a market study on the retail fuel industry published by the Commerce Commission last year. It found that motorists were paying high petrol prices because of lack of competition. The Study led to improvements that include pricing becoming more transparent and requiring petrol stations to display fuel prices on forecourt price boards.
About the Commerce Commission
The Commerce Commission will have the ability to commence the Study after the Terms of Reference are published in the Gazette, possibly on November 19, 2020. The matters to be considered in the study must include, but are not restricted to (a) the structure of the grocery industry at the wholesale and retail levels (b) the nature of competition at the wholesale and retail levels of the grocery industry (c) the pricing practices of the major grocery retailers (d) the grocery procurement practices of the major grocery retailers and (e) the price, quality, product range and service offerings for retail customers.
The Commission will publish its final report on the Study by November 23, 2021.
Fair pricing is a must
Dr Clark said that supermarkets are an integral part of our communities and economy, and hence it is important to ensure that people get a fair deal at the checkout.
“Groceries are one of our most regular expenses. Therefore, we want to make sure that pricing is fair. New Zealand has one of the most concentrated retail grocery markets in the world and there are indicators that competition in the sector has weakened over time. We also know that the average Kiwi household spends roughly 17% of its weekly expenses on food, and this has been increasing year on year. It has been a tough year for many Kiwis and launching this Study is an early fulfillment of a Labour Party campaign commitment to make sure that we are not paying more than we should during the weekly shop,” he said.
Dr Clark said that the Coalition government had initiated the market study on fuel and that the move helped to address competition and bring down prices for consumers.
Keeping groceries competitive
The Study on supermarkets will consider whether the groceries market is competitive.
“A market Study into supermarkets will identify whether there are issues affecting competition, potentially leading to recommendations that could ensure the weekly shop is gentler on the household budget. I’m pleased the Commerce Commission will be getting this work underway. Some of the big supermarket chains have said there is already a healthy degree of competition in the sector, and we want to test whether that is the case,” Dr Clark said.
Market studies help improve consumer outcomes in industries where competition is suspected not to be working well. If issues affecting competition are identified in the study into supermarkets, the government will consider the necessary changes for better outcomes for consumers, he said.
Role during lockdown
Dr Clark said that supermarkets played a vital role during the Covid-19 lockdown in ensuring continued supply of stock to consumers.
“I was impressed with the sector’s measured approach to managing supply issues during the lockdown. While there were some allegations of price-gouging during this time, the study has a focus on longer term competition issues and is not primarily about the conduct of supermarkets in relation to those concerns. I look forward to seeing the outcome of the study,” he said.
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