Commerce Commission launches review into new Grocery Supply Code, says it’s an ‘important checkpoint’ to make sure the Code is on the right track

The Commerce Commission is launching a review into the new Grocery Supply Code less than a year after the Code came into effect.

The competition watchdog says this is to see if the Code is helping to fix the “ongoing power imbalance” between major supermarkets and suppliers.  

The Grocery Supply Code was introduced under the Grocery Industry Competition Act last year, coming into effect in September 2023 and into full effect in March of this year.

The Code was launched in response to the Commission’s 2022 Market Study into NZ’s grocery retail sector which found the state of competition allowed grocery retailers to pass “costs, risks and uncertainty” onto suppliers.

“The power imbalance can reduce the ability and incentives for suppliers to invest and innovate, reducing choice for consumers,” the Commission said in a release about the Code last year.

The Commission said on Thursday the Code review was “crucial” in making sure the Code was operating as intended and continued to be effective.

“It is possible that issues related to the operation and effectiveness of the Code, that are outside the scope of the Commission’s current powers, could also be identified within the review and included in the Commission’s report to the Minister, [of Commerce and Consumer Affairs, Andrew Bayly] ” the Commission added.

Grocery Commissioner Pierre van Heerden said in the release that he’s aware of concerns about whether the Code was doing enough to address existing power imbalances in the grocery sector.

“I want to hear your ideas, experiences and perspectives about the Code to help inform if change is needed,” he said.

He added that he recognised many of the businesses the Code was seeking to protect were still becoming familiar with the Code and what it is intended to achieve.

“I want to make sure that we hear from suppliers, retailers, and any other industry players early in the review process to help shape the scope and direction of the review, which is why I’m opening consultation with enough time to identify the key issues and opportunities and explore changes to the Code if needed.”

The Commission has published a request for views paper for consultation on its website which can be read here.

In it, van Heerden described the first review of the Code as an “important checkpoint.”

The Commission said review submissions close on the 16th September, while cross-submissions will close on the 30th September. 

A draft review published for comment will be released in the first quarter of 2025 and a final review published in mid-2025.

In an open letter to the grocery industry in April, van Heerden said NZ’s $25 billion grocery sector needed to be more competitive and he wants to stamp out “old-style handshake supply agreements” amongst the country’s supermarket duopoly and suppliers. 

“A handshake or verbal agreement is no longer good enough, and suppliers should not feel pressured into signing an agreement without the chance to negotiate the terms with a supermarket first,” he said. 

The Commerce Commission is on a grocery-focussed mission of late as it is also currently in the process of making a decision on the merger of Foodstuffs North Island (FSNI) and Foodstuffs South Island (FSSI). 

The market watchdog has extended its decision date twice with the new decision date set for October.

FSNI and FFSI have said in merger submissions that the proposed merger won’t decrease competition. Parties opposing the merger like The Warehouse, the Food and Grocery Council and the Grocery Action Group however think the opposite.