Cabinet agreed to establish a "quasi-regulatory regime" under which major grocery retailers would negotiate wholesale offerings on commercial terms.
It also agreed to create a "regulatory backstop" which would enable it to crack down harder on grocery retailers if they don't play ball, or if their offerings "are not consistent with what would be expected in a workably competitive wholesale market".
Papers, released by the Government, show that in August Cabinet signed off on a set of penalties to accompany the regime.
Different types of non-compliance – either in relation to the quasi or the full regime – would solicit different types of penalties.
Penalties could be capped at a fixed amount or calculated in relation to how much the supermarket made by doing the thing it shouldn't have done, or in relation to its turnover.
The most egregious breach – "failure to comply with non-discriminatory supply obligations" – could see a culpable individual fined $500,000 or a culpable entity fined $10 million.
An entity could also be fined up to three times the value of the commercial gain made by the breach, or it could be made to pay the equivalent of up to 10 per cent of its annual turnover in New Zealand for every year the contravention occurred.
The method that solicits the greatest penalty could be used.
Cabinet agreed to a set of additional daily penalties that could be applied if a supermarket failed to follow instructions. These range from $30,000 to $100,000 a day.
The proposal is for the penalties to operate on a similar basis to those outlined in the Commerce Act.
Cabinet also agreed the bill should create a toolkit government could use to put pressure on supermarkets to comply.
One of these powers would be to enable the Commerce and Consumer Affairs Minister to seek an Order in Council to require major grocery retailers to "supply wholesale customers with a range of products at regulated prices and terms".
The minister could do this after considering recommendations by a to-be-appointed grocery commissioner.
Cabinet in August also ironed out how it would enable suppliers (ie of a particular fruit or vegetable) to collectively bargain with powerful grocery retailers.
It agreed the exemption be made by way of secondary legislation to parts of the Commerce Act that make collective bargaining illegal.
The Government has already updated the Commerce Act to stop supermarkets buying up land or dictating the terms of leases to block their competitors from getting a foothold in a neighbourhood.
The suite of new rules follows a market study the Commerce Commission did on the supermarket sector.
Comments