Commerce Commission To File Proceedings Against Foodstuffs North Island And Gilmours, Alleging Cartel Conduct

The Commerce Commission will shortly file civil proceedings against Foodstuffs North Island Limited (FSNI) and Gilmours Wholesale Limited (Gilmours) for alleged cartel conduct (market allocation) in breach of the Commerce Act, and alleged breaches of the Grocery Industry Competition Act (GICA).

The Commission investigated agreements that FSNI and Gilmours entered into with a national grocery supplier regarding the supply of products to a hospitality customer.

The supplier and the customer both have considerable volumes of business with FSNI/Gilmours. When FSNI/Gilmours discovered the supplier and customer had established a direct trading relationship, they persuaded the supplier to re-route that business through them.

Commerce Commission Chair, Dr John Small, says the Commission believes FSNI and Gilmours engaged in cartel conduct which is a breach of section 30 of the Commerce Act.

“We take allegations of cartel conduct very seriously. Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly,” Dr Small says.

“In this instance, the supplier wanted to provide a competitive supply channel, but this was stopped by the agreement with FSNI and Gilmours.

“We do not tolerate this kind of behaviour and will not hesitate to take court action, where appropriate,” Dr Small says.

The Commission is also filing proceedings against FSNI and Gilmours under GICA.

The Commission believes FSNI and Gilmours obstructed the supplier’s ability to sell groceries to the customer in question, and did not deal with the supplier in good faith.

Grocery Commissioner, Pierre van Heerden, says this behaviour could be in breach of the Grocery Supply Code.

“The Grocery Supply Code was introduced to address the power imbalance between the major supermarkets and their suppliers,” Mr van Heerden says.

“The major supermarkets are the largest customers for most grocery suppliers. This creates a reluctance for suppliers to call out bad behaviour or push back on the supermarkets for fear of damaging relationships or losing access to supermarket shelves.

“The Commission is acutely aware of the risk suppliers may face coming forward and has ways to protect their identity and business. We have anonymous reporting tools for cartels and GICA and encourage anyone concerned to use these ways of contacting us,” Mr van Heerden says.

As this matter will soon be before the Court, the Commission will not be providing further comment on the case at this time.

Background

Cartel conduct
A cartel is where two or more businesses agree not to compete with each other. Cartel conduct can take many forms, including price fixing, allocating customers, rigging bids or restricting the output of goods and services.

Because cartels can harm the interests of consumers - goods and services become more expensive, consumers end up with fewer choices, and quality and service levels are likely to deteriorate – tackling cartels is one of the Commission’s key enforcement priorities.

Grocery Supply Code
New Zealand’s mandatory Grocery Supply Code was introduced under the Grocery Industry Competition Act 2023. The Supply Code was created to increase transparency and certainty for suppliers through a set of rules supermarkets need to follow when dealing with suppliers. Bringing increased certainty to agreements between supermarkets and suppliers is intended to give suppliers more confidence to innovate and invest in more choice for consumers.

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