Woolworths warned that it might be breaking the law

Dr Alice Hume says Woolworths and Foodstuffs control about 82% of the market. Photo / Supplied

By RNZ

The Commerce Commission has warned Woolworths New Zealand for what it believes is a likely breach of the Grocery Industry Competition Act, following a review of the major supermarkets’ product delisting processes.

The warning comes after the commission analysed the range review processes of all major supermarkets to assess whether they were meeting their obligations under the Grocery Supply Code.

As part of range reviews, supermarkets assess which products they will continue to stock. In some cases, products may be “delisted”, meaning they are removed from shelves.

The updated Grocery Supply Code is due to come into force on May 1. The revised code gives suppliers clearer rights to challenge delisting decisions and greater transparency in their dealings with major supermarkets.

Any breaches of the code are breaches of the Grocery Industry Competition Act.

Commerce Commission head of groceries Dr Alice Hume said Woolworths, Foodstuffs North Island and Foodstuffs South Island together controlled about 82% of New Zealand’s grocery market. She warned losing access to supermarket shelves could effectively be the end of the road for smaller suppliers.

“The possibility of products being removed from shelves is a significant weight on suppliers that can reinforce the power imbalance between major supermarkets and smaller suppliers,” Hume said.

Levelling the playing field

“The risk of losing market access can lead to suppliers accepting conditions that aren’t beneficial to them, and a lack of trust about how supermarkets make these decisions.”

During the commission’s review, it identified and investigated instances where it considered Woolworths was at risk of failing to meet its obligations under the code.

The commission said it issued Woolworths with a warning for what it believed was a likely breach of the act, noting that only a court can determine whether a breach had occurred.

Woolworths has since updated its processes to meet its obligations, the commission said.

In reply, Woolworths supplied the following statement.

“We take our obligations under the Grocery Supply Code seriously and we are proud of the strong relationships we have with our suppliers.

“We work hard to make sure we comply with all of our obligations under the code. If we become aware of potential issues, we fix them as quickly as we can.

“We reviewed and updated all of our templates when the code first came into force, but the Commission expressed concerns about whether one of our template letters included specific language that was required under the code.

“We fully co-operated with the Commission’s inquiries, and have updated our template letter in light of the Commission’s views.”

Hume said the updated code played a crucial role in helping level the playing field between major supermarkets and smaller suppliers, and that the Commission took compliance seriously.

She said range reviews remained an ongoing area of focus for the regulator.

Hume also urged suppliers to come forward if they had concerns about delisting or other potentially unfair treatment.

“You can contact the commission directly, or through the anonymous reporting tool on our website.”

-RNZ