- Hon Dr Duncan Webb
- New supply code prohibits abuse of power by supermarkets over suppliers
- Supermarket duopoly must pay on time and treat suppliers fairly
- Penalties include the greater of 3% of turnover or $3 million for breaches of new code
- Grocery Commission to act as watchdog to enforce new rules
Big supermarket chains face stiff fines for not treating small suppliers fairly, thanks to the Labour Government’s new Grocery Code of Conduct, says Commerce and Consumer Affairs Minister Duncan Webb.
“The big supermarket chains have not been treating local suppliers fairly – they have been taking advantage of their dominance and imposing unreasonable terms and conditions. We are calling time on their poor behaviour,” Duncan Webb said in launching the code in Christchurch today.
“The new code requires large corporates to do things like pay on time, have plain-English supply contracts and deal with small companies in good faith.
“It’s entirely reasonable and hardly too much to ask. Local suppliers have been stretched for a long time, and that’s stifled innovation and the development of our food supply chain.
“Establishing this Grocery Code of Conduct is another critical step in the Government’s reform of the grocery sector to make it fair for consumers and suppliers.”
Agreed to this week, the code will initially apply to the two big supermarket chains, Woolworths New Zealand (including the Countdown Brand) and Foodstuffs North Island and South Island (including Pak ‘n Save, New World and Four Square).
The maximum penalty for companies breaching the code is the greater of 3 per cent of turnover, the value of any commercial gain from the breach, or $3 million. Individuals face fines up to $200,000.
The code comes into force on 28 September and will be monitored and enforced by new Grocery Commissioner Pierre van Heerden, whose position was established in July.
Explanatory notes:
In 2020, the Government commissioned a market study into the retail grocery sector by the Commerce Commission, looking at the factors affecting competition and supply. The final report was published in March last year.
In July this year, the Government passed the Grocery Industry Competition Act, the legislation that enables, among other things, the Grocery Code of Conduct and the position of the Grocery Commissioner to be established.
Other measures the Government has taken so far to improve competition in the grocery sector include:
- Banning restrictive land agreements that locked new entrants out of locations for new supermarkets.
- Making unit pricing mandatory, so it’s easier to compare the prices of different products at the supermarket.
- Requiring major grocery retailers to open wholesale offerings, including home brands, to other grocery retailers so they have direct access to a range of wholesale groceries at competitive prices
The main provisions of the code include:
- a requirement to act in good faith when dealing with suppliers
- a requirement that all supply agreements be written in plain language and contain a minimum amount of information
- restrictions on changes to agreements made without the consent of the supplier and retrospective variation to supply agreements
- restrictions on when a retailer may require a supplier to use a particular transport or logistics service
- a requirement that retailers pay supplier invoices within a reasonable timeframe
- requirements for better sharing of costs relating to promotions
- restrictions on retailers requiring payment for its own business activities, such as merchandising.
- restrictions regarding payment for lost, damaged and spoiled stock
- requirements for the acceptance or rejection of fresh produce
- an obligation to respond to requests for price increases from suppliers
- protections for a supplier’s confidential information and intellectual property
- obligations preventing retailers from unduly obstructing suppliers from entering into supply agreements with other parties
- protections relating to anti-retaliation and freedom of association.
More information on the Grocery Supply Code of Conduct is available on MBIE’s website:
