Foodstuffs North Island axes 78 of 135 anti-competitive covenants after crackdown

Chris Quin released details of how the chain has responded so far. Photo / supplied

New Zealand's biggest supermarket chain is responding to the Government's crackdown by removing restrictive covenants on 78 of 135 affected titles or properties where it had tried to ban competitors from building new stores.

In revealing exact numbers, the chain behind Pak'nSave and New World showed just how far it had gone to try to stamp out the competition by placing restrictive covenants on properties it controlled but where it didn't have supermarkets.

It didn't want its rivals to get in there either.

The sector was outed in engaging in those anti-competitive land wars, buying up properties or dictating the terms of leases to try to stop their competitors from getting a foothold in dozens of areas throughout New Zealand.

That lessened competition, the Government said, and resulted in the Foodstuffs/Countdown duopoly making $1m excess profits a day.

Today, Foodstuffs North Island chief executive Chris Quin gave an update on how it was complying with the urgent new legislation outlawing the moves.

Under the heading 'freeing up land for supermarket development' on its website dashboard, the co-operative revealed the true scale of how far it had gone to try to eliminate competitors - and how it was mending its ways:

• Covenants removed on 78 titles but still 57 further titles where FSNI must act or it breaches the new law;

• 58 per cent of affected titles have had covenants removed;

• 100 per cent of remaining covenants are registered against land FSNI no longer owns: "We are approaching the owner of each parcel of land to remove these."

FSNI also released a list of other moves it has made to mend its ways after the Commerce Commission probe then the Government's urgent Budget night move to introduce a new law to ban stores from using those covenants.

"We have committed to ending the use of restrictive land covenants and exclusivity provisions in leases and immediately started a process to remove all existing such clauses," FSNI said today.

"While that process is under way no covenant or exclusivity provision has or will be enforced. We have also supported the Commerce (Grocery Sector Covenants) Amendment Act 2022, which deems covenants unenforceable and will accelerate the process of their removal," the chain said.

Commerce and Consumer Affairs Minister David Clark - shaking up supermarkets. Photo / supplied

FSNI says it is "working through the process of reviewing and taking steps to proactively agree variations to leases to remove exclusivity arrangements".

It is "no longer including restrictive covenants or lease exclusivity in provisions in new property transactions" and says it doesn't land bank.

Commerce and Consumer Affairs Minister David Clark said of why the Government had acted on the covenants: "The Commerce Commission's market study found competition is not working well for consumers in its current state. In fact, it found major grocery retailers are earning excess profits of around $1 million a day. Something needs to change."

FSNI list other ways it is responding to the Government crackdown.

"We have been working constructively with the Ministry of Business, Innovation and Employment in recent weeks towards a grocery code of conduct for the industry and have indicated support for a set of principles that we believe will provide clarity, certainty, fairness, meaningful consequences, and opportunities for redress when the code is not honoured.

"We also support the Commerce Commission's recommendation that a specialist grocery regulator be established with appropriate powers and resources to monitor compliance with the code and undertake effective enforcement action where appropriate," the chain said.

On unit pricing, work is progressing to increase the proportion of FSNI products showing unit pricing which will help our customers make accurate price comparisons online and on shelf.

"We've recently completed phase one which means the majority of eligible in-store products are now displaying unit prices. We're on track to deliver phase two by end of 2022 with various initiatives under way to make unit pricing more accessible for our customers," FSNI said.

Quin said: "When the Commerce Commission released its final report on March 8, we agreed with the Commission that those recommendations were both proportionate and would make a meaningful difference for consumers. We committed to being transparent and accountable for implementing the recommendations and are moving at pace to do that.

Government wants more consumer choice in the sector. Photo / Greg Bowker

"Our latest dashboard update includes important recent developments and commitments in relation to the establishment of a grocery code of conduct, the removal of restrictive land covenants, progress towards more unit pricing, and access to our co-operatives' wholesale supply for non-member retailers that will collectively deliver better value for all New Zealanders."

Finance Minister Grant Robertson said in May that the Government would tackle the root causes of higher grocery bills by introducing the law change to stop supermarkets from blocking competitors from accessing land to open new stores.

"The Commerce Commission's findings indicate that restrictive covenants over land are a major barrier to supermarkets accessing new sites, so we're banning these covenants from being used to stop competition. Legislation will be introduced on Budget night to make this happen," Robertson said in May.

The code of conduct between major retailers and suppliers could be developed, including what role a dedicated regulator for the grocery sector could play, he said.

Last week, the Government said supermarkets would get a new watchdog to ensure they are not ripping off shoppers.

Clark said the Grocery Commissioner would hold the sector to account and ramp up competition.

The watchdog would be based within the Commerce Commission and review competition in the sector annually.

The Government also released a draft code of conduct to ensure suppliers to supermarkets get a fair deal.