Opaque Government Policy On Supermarket Collaboration Will Harm Consumers

The Consumers’ Union of Aotearoa remains extremely concerned about the Government’s opaque and increasingly contradictory policy concerning competition law obligations owed by retailers while they respond to COVID-19.

The Government presented its policy paper, ‘Commerce Act 1986, Government Policy Statement on essential goods and services such as grocery products in response to COVID-19’, on 30 March 2020, although the paper is not available for inspection by the public on the Parliament website (see link here).

In correspondence with the Consumers’ Union of Aotearoa on 30 March, the Minister for Commerce and Consumer Affairs Hon Kris Faafoi’s Private Secretary noted that the policy paper was made by the Minister in pursuance of section 28 of the Commerce Act 1986. Section 28 affords the Minister no such powers to issue policy directions, and so it is assumed that the policy paper was made pursuant to other powers.

Nevertheless, the effect of the Minister’s original and un-revoked statement issued on 22 March (see here) is to effectively ask the Commerce Commission to suspend its enforcement of competition law to enable an unspecified response to the COVID-19 outbreak by businesses (specifically supermarkets and telecommunications companied) to be more effective. As it stands, the Ministers statement remains unlawful (see our previous release and letter to the Minister here) and in contradiction to statements made by the Prime Minister (see our release here). The Consumers’ Union of Aotearoa is expecting responses from the Minister and Commerce Commission in due course.

With a view to being constructive, the Consumers’ Union of Aotearoa has looked at what has been done in other countries to enable an effective response while maintaining effective market and completion controls so that consumers and suppliers are not ripped off.

In particular, regulations laid before the UK’s House of Commons on 27 March (see here) appear to lay the groundwork for a strategy that will enable grocery retailers in the UK to engage in specific forms of coordination in order to respond to COVID-19 related matters, while expressly carving out any ability for sharing of information regarding costs or pricing. For example, supermarkets may coordinate with one another concerning matters that are directly and demonstrably useful in responding to the virus, such as opening hours, limited purchasing restrictions, logistics services, temporary closure of stores, etc.

Minister Faafoi and his staff should study the UK example carefully and determine whether a similar approach would be beneficial in New Zealand.

The Commerce Commission should be aware that supermarkets are or will be in the process of reallocating foodstuffs from their businesses that supply restaurants and catering businesses to their consumer focused supermarkets.

It is evident that supermarkets will stand to recoup a substantial mark up on those goods, given that they may see fit to charge consumer prices for goods that are usually procured by restaurants and cafes, etc, at commercially discounted rates.

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The Consumers’ Union of Aotearoa is an action group dedicated to improving the competitiveness of New Zealand’s market for the benefit of average consumers. If you want to get involved, write to us at consumersunionofaotearoa@gmail.com and follow us on Twitter at @of_aotearoa.

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