Commerce Commission retail grocery sector review

Proposed feedback on the Commerce Commission’s grocery sector review

HortNZ’s submission will focus on supplier (grower) issues.  It will support the Commission’s recommendations to consider and do more work on 1/ a supplier code of conduct and 2/ allowing suppliers to collectively bargain. 

Supplier code of conduct

HortNZ plans to make the following points:

• There needs to be a dry goods / frozen code as well as a fresh code as different factors are applicable
• It needs to be legally mandatory. The Australian experience is that voluntary codes do not work
• The code should not prevent innovative and direct supply arrangements, so should permit contracting out if mutually agreed following legal advice
• The main outcome needs to be transparency. That is, consumer, retailer, distributor, supplier / grower transparency
• The code should be a standard form produce agreement
• There should also be a communications and education programme established for all participants including consumers
• The code should apply to all retailers and distributors – not just the major supermarkets
• The code should set minimum standards for the setting and variation of terms of supply between suppliers and retailers / distributors:
  • Obligation to act in good faith
  • Be recorded in writing
  • Be written in clear and concise language
  • Set out or provide for quantity and quality standards
  • Set out or provide for delivery requirements
  • Provide for when product may be rejected
  • Set out a formula or method for supplier / grower payments
  • State the maximum period for payment
  • Set out the circumstances when payment may be withheld, or deductions made
  • Set limits on retrospective variations of the terms of supply and only by mutual agreement
  • Set limits on unilateral variations of the terms of supply and only by mutual agreement
  • Provide clear processes for category review, deletions and credits
  • Provide payment provisions for agreed and legitimate services that are listed
  • Provide for pass through of promotions to consumers so that there is no margin fattening
  • Exclude payments for: shelf space, investment in wage accounts
  • Include intellectual property protection for suppliers / growers
  • Include independent dispute and appeal processes. 

Suppliers’ collectively bargaining

• Endorse further consideration of the Commission’s view that “another method of addressing any power imbalance would be the introduction of collective bargaining on behalf of suppliers”
• Enable industry organisations to administer and co-ordinate collective bargaining
• Note that collective bargaining by suppliers will not be sufficient, on its own, to overcome a significant imbalance between suppliers and the major grocery retailers
• Note that the Australian Competition and Consumer Commission class exemption for collective bargaining by small firms with a collective annual turnover of less than $10 million is far too low
• Note that any authorisation or exception would need to ensure:
  • A maximum size for any business involved in collective bargaining
  • The collective bargaining did not permit, or facilitate, additional conduct that would be likely to harm competition
  • Transparency when collective bargaining is occurring, so it could be monitored.

Additional commentary

The HortNZ submission will conclude with some commentary about:

• Food security for New Zealand and the Pacific
• The need to ensure continuity of supply
• The New Zealand horticulture industry’s points of difference:
  • Healthy food
  • Tiny environmental footprint
  • Sustaining rural communities
  • Provenance.