The Commerce Commission has launched a formal investigation into one of New Zealand's supermarket chains, Countdown. The move follows a complaint by Labour Party MP Shane Jones in Parliament accusing Countdown of forcing suppliers to pay it retrospective payments.
Labour MP Shane Jones. Photo: RNZ / Diego Opatowski
In answer to Parliamentary questions from Mr Jones on Thursday, Commerce Minister Craig Foss said he could confirm that the commission would formally investigate the allegations of anti-competitive behaviour towards suppliers by Countdown.
Mr Foss says under the existing Commerce Act, the commission has good oversight and tools to investigate the matter, and MPs should let the process follow its course.
In a statement, the Commerce Commission says it will seek a wide range of information from all areas of the supermarket sector. The investigation is expected to take a number of months.
Using parliamentary privilege, Shane Jones first claimed a week ago that Countdown has told firms supplying products and produce to its stores that they need to pay compensation for losses it suffered in 2013. He said he had written to the commission.
The MP made fresh claims in the House on Thursday that Countdown has used extortionary tactics against food suppliers.
Woolworths Australia chairperson Ralph Waters. Photo: AFP
On Wednesday in Parliament, Mr Jones accused the chair of Woolworths Australia, which owns Countdown, of ringing suppliers to tell them not to co-operate if the commission conducted an inquiry. Ralph Waters has denied the claim.
Mr Jones met with the Commerce Commission on Thursday and later refused to reveal details of any evidence he might have to support his claims against Countdown. He told Radio New Zealand's Checkpoint programme he will give evidence to the commission and says it has given him an assurance that any suppliers he names will be given anonymity.
The MP is happy with the scope of the investigation and hopes that affected suppliers will be able to give information to the commission freely and frankly.
"If they don't, I think it shows a woeful weakness inside the commission's operating mandate. I was assured that section 98,99 etcetera within the Commerce Act should allow them to assuage their concerns and really and uncover the information."
Earlier, Mr Jones told Radio New Zealand's Morning Report programme that scores of suppliers have contacted him supporting his allegations, with some suggesting the duopoly that controls most of New Zealand's supermarket sector isn't working.
"I'm astounded by the number of people who have suddenly said, 'To hell with it, we've had a gutsful of this, we're going to back you, Jonesy'. There are scores of suppliers who have emailed me, who have called me and sent messages of support with very detailed episodes in their dealings with this sector of the economy."
Supermarkets to cooperate
Countdown and Woolworths Australia say they will cooperate fully with any investigation by the Commerce Commission and had nothing else to add on Thursday.
Its rival Foodstuffs, which owns New World and Pak'nSave is not covered by the inquiry. However, it says it is more than happy to contribute its view on normal industry practices and what it believes to be best practice or anything else the commission wants.
Meanwhile, Finance Minister Bill English says the Government is considering reviewing a part of the Commerce Act that deals with market competition. He says any inquiry would assess whether the supermarket industry is competitive enough with just two big players.
Suppliers cut off in Australia - lawyer
An Australian competition lawyer says supermarkets there cut local suppliers off completely if they do not play ball.
Australia's competition watchdog, the ACCC, is investigating whether supermarkets are bullying suppliers after about 50 came forward with complaints there.
University of Melbourne senior fellow Alexandra Merrett, who specialises in competition and consumer law and who has worked for the ACCC, says there's been lots of public outrage at the allegations of bullying by supermarkets in Australia.
Ms Merrett told Morning Report the stakes are high for suppliers who do not fall into line, because they can be cut off. However, she says New Zealand-based supermarkets may not be able to get away with treating their local suppliers in the same way.
Ms Merrett also says that if supermarkets have to pay suppliers more they may not prices up per se, but find another way of doing it.
The likely outcome, she says, is that "prices hold steady and might even fall but the range of choice available to the consumer can fall, the product quality can fall - which is effectively a way of increasing their prices without actually increasing the number."
'Imbalance' between supermarkets and suppliers
The Food and Grocery Council says there is a power imbalance between supermarkets and suppliers, and negotiations between them need improving.
The industry body, which represents suppliers, says there needs to be more of a discussion, rather than the ultimatums on pricing that can be delivered by supermarkets at the moment.
Consumer New Zealand says shoppers won't necessarily have to pay higher prices at supermarkets if the latter are forced to give a better deal to suppliers.
Chief executive Sue Chetwin says some of the costs of any move to pay suppliers more might be passed on to consumers, but it would "stop the trend for a supermarket putting more of their own products on their shelves and squeezing out their independent suppliers - and that in itself actually means that prices should remain reasonably competitive."
