The minister behind the mega supermarket competition shake-up is reassuring Kiwis he won't personally be setting the prices that major retailers could be forced to sell groceries to competitors at.
The Government's introducing regulatory interventions that the newly-established Grocery Commissioner could enforce if the main supermarket duopoly doesn't open their wholesale operations up to smaller retailers at fair prices.
"It means other retailers will now be able to source and sell a wider range of groceries at better prices," Commerce and Consumer Affairs Minister David Clark said on Wednesday.
"Under these changes the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms. However if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices."
The new interventions that will become available if major supermarkets don't negotiate in good faith include forcing wholesale groceries to be sold at set prices or on certain terms.
Speaking to Newshub Late on Wednesday night, Clark told Kiwis it won't be him deciding how much goods should be sold at.
"Please be rest assured it will not be me as a Cabinet minister making any decisions of that nature," he said.
"It would be the economic regulatory experience that sits at the Commerce Commission and it's got a range of tools. It can open up transparency in different ways. It could just say that the goods have to be supplied at the same price to different retailers, including their own."
The powers will go to the Grocery Commissioner, an entity currently being set up within the Commerce Commission. It will also have the ability to issue warnings and fines to retailers that don't follow a code of conduct being developed between retailers and suppliers.
But Clark doesn't believe the commissioner will actually need to step in with regards to wholesale operations.
"They've said they want to open up their wholesale arms to other providers who would be competitors in the market. We know that they've been running expression of interest processes for that," he said.
"I'm hopeful they'll find a commercial solution. But what we're saying to them loud and clear, that is if that doesn't happen we are prepared to step in."
Woolworths says it's "already actively working to open up a wholesale channel and have nearly signed up our first multi-store wholesale customer which we hope to confirm soon".
"A backstop should be there to use if the industry doesn't take active steps to make wholesale happen. It's our view that we are best to get on and do it, and that’s what we're doing," the supermarket giant added.
The new wholesale business unit is talking to more than 50 small retailers who have "expressed interest in becoming wholesale customers of ours".
Foodstuffs said: "There isn't another market we're aware of where access to wholesale groceries is regulated – so it's useful to today see the principles of the proposed regulatory backstop to provide some clarity".
"We will now take time to review this in detail and continue working with MBIE."
The Government has agreed to take up recommendations from the Commerce Commission which in March reported that the grocery sector is "not working well for New Zealand consumers" and competition "is muted". Supermarkets are earning $1 million a day in excess profits due to the lack of competition in the market, the commission said.
Earlier this year, Parliament passed legation to prohibit restrictive and exclusive covenants over land and leases that limited competitors' ability to enter the market. The Government's also looking at mandatory unit pricing to ensure easy price comparisons can be made.
"We have already seen obviously moves from the duopoly with price rollbacks and price freezes," Clark said on Wednesday.
"They have produced some cheaper prices already with the spotlight on them. They've accepted that change needs to happen, but we're more concerned that there's a structural change over time and consumers can be sure they're getting a fair deal at the checkout, not just when the spotlight's on the supermarkets, but year in, year out."
