In this article we discuss two recent developments in trade practices and competition law both in New Zealand and across the Tasman, and their potential implications for your business.

New Zealand supermarket majors under investigation by the New Zealand Commerce Commission following allegations of Fair Trading Act breaches.

The New Zealand Commerce Commission (NZCC) is investigating the country’s major supermarkets over potential breaches of the Fair Trading Act (FTA) after Consumer NZ recently lodged a complaint with the NZCC. 

Woolworths NZ, Foodstuffs North Island, and Foodstuffs South Island are the subjects of the investigation.^[1]

Consumer NZ’s complaint to the NZCC accused the supermarkets of deceptive pricing, overcharging compared to advertised prices, and misleading promotional practices. The complaint follows an influx of submissions from dissatisfied shoppers. During their “end dodgy deals” campaign from September 2022 to the end of June 2023, Consumer NZ received a total of 602 complaints. These grievances encompassed issues such as mismatched prices, instances of being overcharged, deceptive specials, and misleading promotional offers. Based off these submissions, Consumer NZ observed a prevalent scepticism amongst Kiwis towards supermarkets.^[2]

The deputy chair of the NZCC, Anne Callinan, highlighted that the primary focus of the investigation is to evaluate whether the promotional practices of these companies align with the FTA.^[3]

The investigation is in its early stages and aims to address concerns related to competition and pricing in the retail grocery sector.^[4]

Wider Competition Issues in the Supermarkets Sector

The concern about competition and prices in the retail grocery sector is a longstanding issue of both political and public interest, driven by the challenges posed by concerns regarding the cost-of-living.

In March 2022, the NZCC released its report on the NZ retail grocery sector, which confirmed preliminary findings that competition in the sector is not effectively benefiting consumers.^[5]

The Grocery Industry Competition Act (GICA) came into force on 10 July 2023, and empowered the NZCC to monitor and regulate the grocery industry. The GICA specifically identifies Woolworths NZ, Foodstuffs North Island, and Foodstuffs South Island as regulated grocery retailers, obliging them to consider wholesale supply requests in good faith and adhere to the Grocery Supply Code. The implementation of the GICA aims to enhance competition and transparency in the sector, with the ultimate goal of benefiting New Zealand consumers in the long term.^[6]

In October 2023, the newly appointed Grocery Commissioner, Pierre van Heerden, emphasised the importance of clear and accurate pricing, addressing supermarkets as the most complained-about sector to the NZCC, with pricing issues being a common grievance. The NZCC announced its exploration of various options to address pricing concerns while urging supermarkets to establish effective processes promptly. In December 2023, Mr van Heerden challenged supermarkets to provide meaningful promotions and savings during the holiday period, aiming to alleviate the financial pressures of the cost-of-living.^[7]

On 15 December 2023 a clearance application was filed by Foodstuffs North Island and Foodstuffs South Island with the NZCC. The application seeks clearance for the merger of both entities, envisioning the formation of a unified entity—Foodstuffs New Zealand. The NZCC is currently scheduled to announce its decision on the proposed merger by 5 March 2024, although this timeline is subject to change as the investigation unfolds.^[8]

Recently, the Hon. Andrew Bayly, the Minister of Commerce and Consumer Affairs under the new Government, said that he has encouraged the NZCC to utilise its entire litigation fund of $12.6 million this year and that he wants the NZCC to take on major players like the supermarket duopoly.^[9] Ms Callinan said that the NZCC’s enforcement portfolio this year will include some of New Zealand's largest companies, including those in the retail sector.^[10]

Record penalty for resale price maintenance in Australia

Australian power tools supplier Techtronic was ordered by the Australian Federal Court in December 2023 to pay penalties of A$15 million, the highest penalty ever imposed for resale price maintenance in Australia to date.

The Australian Competition and Consumer Commission (ACCC) brought proceedings against Techtronic for resale price maintenance. Techtronic is an Australian subsidiary of a Hong Kong based company, and a wholesale supplier of Milwaukee products in Australia.

On 1 December 2023, Techtronic admitted in the Australian Federal Court that between January 2016 and July 2021 it entered into 97 agreements with retailers and dealers that restricted the sale of Milwaukee branded products below a specified minimum price.  Techtronic also admitted that it enforced the restrictive retail price maintenance provisions in its contracts 29 times between 2016 – 2020.  It enforced these provisions by issuing warnings to dealers who attempted to sell, or sold, Milwaukee products below the specified minimum price, and also by withholding supply from two dealers.

In addition to the record penalty, the Federal Court ordered Techtronic to post corrective notices on its website and to dealers, implement a compliance program and pay part of the ACCC’s costs.

The ACCC’s Deputy Chair Mick Keogh said that “[t]he ACCC submitted to the Court that this level of penalty was appropriate given the seriousness, duration and extent of Techtronic’s conduct. It sends a strong signal to deter others from engaging in [resale price maintenance] and should serve as a warning for all other businesses.”^[11]

Resale price maintenance issues have also recently been investigated by the NZCC in the New Zealand consumer electronics sector.  In 2022, the NZCC issued Panasonic with a warning for engaging in resale price maintenance by:

• Withholding supply of TVs to two retailers, because they offered TVs at a price less than a price specified by Panasonic; and
• Supplying TVs to a retailer on terms less favourable than other retailers because that retailer offered TVs at prices lower than the price specified by Panasonic.

Panasonic was fortunate to receive a warning letter from the NZCC, rather than being prosecuted and fined for resale price maintenance as Techtronic was in Australia. 

Given the recent encouragement by the new Minister of Commerce and Consumer Affairs to the NZCC to utilise its entire litigation fund, and the comments by the NZCC in response, we would expect to see investigations and enforcement action against companies for breaching either the Fair Trading Act and/or the Commerce Act to increase going forward.

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Special thanks to Holly Soar and Achi Simhony for their help preparing this article.