Jon Duffy: A vote of no confidence in the supermarkets

The Government has announced the immediate introduction of legislation to prohibit restrictive covenants on land used by supermarkets to limit site availability to competitors.

We think the Government’s move is a clear vote of no confidence in the supermarket sector and an acknowledgement that regulation is the best way to bring about change.

The 71,000 signatures we have gathered so far in our campaign to #stopthesuperprofits is a vote of no confidence from New Zealanders as well.

We were also pleased to see an acknowledgement in Budget 2022 of the daily struggles people have with the cost of living. We have seen concerns around the cost of living steadily climbing, as people grapple to make ends meet.

The Government used the Budget to restate its commitment to boosting competition in New Zealand’s supermarket sector, to ensure people pay fair prices for food and other basics.

This is the start of what we hope is a comprehensive process to shake up the sector and pave the way for improved competition and lower prices.

The use of restrictive covenants by major grocery retailers was identified by the Commerce Commission as one of the major barriers stopping new competitors coming into the market and competing with the Foodstuffs-Woolworths duopoly.

The Government has acknowledged that, of all the commission’s recommendations, prohibiting restrictive covenants was one thing that could be done simply and quickly. It may be the quickest and easiest thing the Government can do, but the move is still significant.

Following the commission’s market study, Foodstuffs stated publicly that it will voluntarily stop the use of restrictive covenants. Given the commission’s findings, it would be difficult for them to do otherwise. However, it seems clear – from the move to introduce legislation so urgently – that the Government lacks faith in the supermarkets doing so without strong regulation as a backstop.

This is only the first step in unwinding the damage years of muted competition have created in the sector, and we are encouraged by the speed of the move.

There is much more to do, and we are asking the Government to go further than the Commerce Commission’s recommendations and intervene to increase competition in the market. Increased competition is the key to addressing the duopoly’s high profitability and its impact on shoppers.

You can help by signing our petition here and lending your voice to the call for further action by the Government to fix this broken market. If you've already done so, thank you for your support.