By Rebecca Styles
Research Lead | Hautū Rangahau
The Commerce Commission has filed proceedings against Foodstuffs North Island alleging the supermarket blocked competitors setting up near its locations.
The Commission has filed proceedings in the Wellington High Court against Foodstuffs North Island, alleging anti-competitive land covenants were used by the supermarket co-operative to block competitors opening rival stores at certain sites.
Foodstuffs North Island runs Pak’nSave, New World and Four Square stores.
The proceedings follow an investigation into the conduct, which was completed after the Commission’s market study into the grocery sector in March 2022.
Since the market study, a law change was brought in to specifically ban land covenants in the grocery sector where they lessen competition.
The Commission and Foodstuffs North Island have “entered a settlement to resolve the proceedings on terms acceptable to both parties”.
While the covenants are historical, the Commission considered the conduct serious enough to warrant proceedings under the Commerce Act.
Commission Chair, John Small, said, “This is a vital $25 billion sector, which impacts every Kiwi consumer. The covenants were of long duration, and we allege were lodged with the purpose of hindering competitors in local towns and suburbs where Kiwi consumers buy their groceries.”
The action sends a clear signal that the Commission will continue to pursue companies in any industry who use land banking to stop rivals setting up close by.
“Land covenants have the potential to harm competition by raising barriers to entry or expansion in a market, making it harder for rival businesses to compete effectively and gain scale. Ultimately, the loser here is the Kiwi consumer who is deprived of the benefits that come from a more competitive market,” said Commission Chair, Dr Small.
Dr Small acknowledged in August 2021, that Foodstuffs North Island committed to stop using land banking and exclusivity provisions in leases.
Penalties for breaching the Commerce Act can be up to $10 million or three times the commercial gain derived from the breach, or 10% of annual turnover, whichever is greater.
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