The Commerce Commission has issued a warning to Foodstuffs North Island (FSNI) for their treatment of a supplier that likely breached the Grocery Industry Competition Act 2023.
“We believe that Foodstuffs North Island likely breached a fundamental aspect of the Supply Code which is that retailers deal with suppliers in good faith at all times,” Grocery Commissioner Pierre van Heerden says.
“I’m concerned that this follows a pattern of behaviour that has been present in the industry for decades.
“This behaviour has been enabled for so long due to the significant power imbalance between the major supermarkets, who hold the vast majority of the market, and suppliers, who have limited bargaining power in comparison.
“Foodstuffs North Island appears to have obstructed and delayed a supplier request by acting in ways that we believe were uncooperative and unreasonable.
“In this instance, based on the evidence we have, we decided a warning was the right response. However, if more examples come to light, we will not hesitate to take further action,” Mr van Heerden says.
The Category Manager at FSNI, who acted as the main point of contact for the supplier, also came under investigation regarding their role in this matter.
“Suppliers are reliant on their relationships with the retailers’ commercial teams, so the staff in these roles within the supermarkets hold a lot of power. Any behaviour that weaponises this power imbalance is unacceptable,” Mr van Heerden says.
“The major supermarkets have a responsibility to make sure their staff are properly trained. They need to make sure their staff follow the rules and deal with suppliers in good faith.
“The changes we’re proposing to the Supply Code are intended to provide more scrutiny to these relationships and clarity about what is acceptable behaviour.
“Our supplier survey showed that 37% of suppliers reported their interactions with Foodstuffs North Island as negative or very negative. This is significantly higher than suppliers’ ratings for Woolworths and Foodstuffs South Island, at approximately 20%.
“We’re focused on addressing this power imbalance and improving things for suppliers. We really appreciate where suppliers have come forward to tell us about issues so we can take action – like in this case where we heard directly from the supplier involved,” Mr van Heerden says.
Only a Court can determine if there has been a breach of the Act.
Background
The warning letter can be found on the Commission’s website.
New Zealand’s mandatory Grocery Supply Code was introduced under the Grocery Industry Competition Act. The Code was created to increase transparency and certainty for suppliers through a set of rules supermarkets need to follow when dealing with suppliers. Bringing increased certainty to agreements between supermarkets and suppliers would give suppliers more confidence to innovate and invest in more choice for consumers.
The maximum penalty for breaches of the Supply Code for an individual is $200,000, or in any other case the greater of $3 million, and the value of any commercial gain; or if that can’t be ascertained 3% of the company turnover.
