First Annual Grocery Report Highlights Urgent Need for Reforms to Boost Competition

"The report confirms that the previous government's measures have fallen short, with supermarket prices outpacing wholesale costs and profit levels remaining stubbornly high," Bayly stated.

Commerce and Consumer Affairs Minister Andrew Bayly has emphasized the urgent need for regulatory reforms following the release of the first annual grocery report, which paints a troubling picture of New Zealand's $25 billion grocery sector. The report reveals rising checkout prices, increasing supermarket margins, and profits that remain higher than expected in a truly competitive market.

"The report confirms that the previous government's measures have fallen short, with supermarket prices outpacing wholesale costs and profit levels remaining stubbornly high," Bayly stated. He welcomed the Commerce Commission's decision to activate new regulatory powers aimed at enhancing the uptake of the wholesale regime, balancing power between suppliers and supermarkets, and increasing pricing transparency.

However, Bayly noted that the report also points to broader, structural issues within New Zealand's trading, planning, and regulatory frameworks. "We have been upfront with Kiwis that achieving better social outcomes requires reducing regulatory barriers," he said. To address these challenges, the Government has already initiated a review of the Overseas Investment Act and is pursuing reforms to the planning system to unlock land for development.

The report highlights significant issues with current planning rules, which have restricted the availability of urban land, creating high barriers to entry and stifling competition. In response, the Government is redesigning the Resource Management Act and directing councils to allow a greater mix of residential and commercial activities in urban areas. Bayly expressed optimism that these changes would eventually lead to the establishment of metro-style supermarkets alongside residential developments, similar to models seen overseas.

In addition to these efforts, the Government is reviewing New Zealand's competition settings, considering the report's findings concerning the Fair Trading Act and Commerce Act. Bayly is open to the Commerce Commission's recommendation to increase penalties under the Fair Trading Act for inaccurate or misleading prices.

Bayly also announced the approval of rules for the new Grocery Industry Dispute Resolution Scheme, designed to give suppliers and wholesale customers a stronger voice against supermarket giants and boost confidence in retail negotiations. This move is expected to improve product range and pricing for consumers.

Looking ahead, Bayly is awaiting further analysis from the Commerce Commission regarding the more than 100 supermarket sites being "land banked." He will seek advice on whether this practice complies with competition law and what actions can be taken to address it.

"The findings of the report are disappointing, but the Government and Commerce Commission are committed to fostering greater competition across all sectors of our economy," Bayly concluded, pledging to take decisive actions to support this goal.