Foodstuffs, Gilmours accused of cartel conduct: Commerce Commission to take supermarket, wholesaler to court

Grocery giants Foodstuffs North Island and Gilmours are being accused of cartel conduct as the Commerce Commission flags that it intends to take the companies to court.

Both companies are accused of blocking a supplier from having a direct trading relationship with a customer, instead persuading the supplier to re-route its business through them.

Foodstuffs North Island (FSNI) “strongly deny any unlawful conduct”.

The Commerce Commission said it would file civil proceedings against the two companies for allegedly breaching the Commerce Act and the Grocery Industry Competition Act.

The commission investigated agreements FSNI and Gilmours had with an unnamed national grocery supplier. The agreements regarded supplying products to an unnamed hospitality customer.

Foodstuffs brands include Pak’nSave, New World and Four Square.

“The supplier and the customer both have considerable volumes of business with FSNI/Gilmours,” the commission said.

“When FSNI/Gilmours discovered the supplier and customer had established a direct trading relationship, they persuaded the supplier to re-route that business through them.”

Commerce Commission chairman Dr John Small said the commission “does not tolerate this kind of behaviour”.

“We take allegations of cartel conduct very seriously. Cartel conduct harms consumers through higher prices or reduced quality and it harms other businesses that are trying to compete fairly,” Small said.

“In this instance, the supplier wanted to provide a competitive supply channel, but this was stopped by the agreement with FSNI and Gilmours.

“We do not tolerate this kind of behaviour and will not hesitate to take court action, where appropriate.”

FSNI denied its conduct was illegal.

“Foodstuffs North Island and our stores are committed to complying with all our regulatory obligations, and we co-operated fully with the Commerce Commission throughout their investigation of this matter,” it said in a statement.

“We strongly deny any unlawful conduct.”

As the matter was now before the courts, FSNI said it would not be appropriate to comment further.

Small said the commission would also file proceedings against FSNI and Gilmours under the Grocery Industry Competition Act (GICA).

“The commission believes FSNI and Gilmours obstructed the supplier’s ability to sell groceries to the customer in question and did not deal with the supplier in good faith.”

Grocery Commissioner Pierre van Heerden said such behaviour could be a breach of the Grocery Supply Code.

“The Grocery Supply Code was introduced to address the power imbalance between the major supermarkets and their suppliers,” van Heerden said.

“The major supermarkets are the largest customers for most grocery suppliers. This creates a reluctance for suppliers to call out bad behaviour or push back on the supermarkets for fear of damaging relationships or losing access to supermarket shelves.

“The commission is acutely aware of the risk suppliers may face coming forward and has ways to protect their identity and business. We have anonymous reporting tools for cartels and [the] GICA and encourage anyone concerned to use these ways of contacting us.”

Gilmours has been approached for comment.

Raphael Franks is an Auckland-based reporter who covers business, breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022.

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