Watchdog settles with Foodstuffs North Island over 'anti-competitive’ covenants
Wednesday, 19 June 2024
The Commerce Commission has announced it has filed proceedings but reached a settlement with Foodstuffs North Island over anti-competitive land covenants.
The competition watchdog began investigating in 2022 whether covenants entered into by Foodstuffs North Island, Foodstuffs South Island and Woolworths NZ had breached the Commerce Act.
But a spokesperson said it had closed the investigations into Foodstuffs South Island and Woolworths NZ “with no further action”, noting a law change in 2022 had made certain grocery-related covenants “prohibited and unenforceable”.
Foodstuffs owns the Pak’nSave and New World supermarket brands.
The Commerce Commission said on Wednesday that it had filed proceedings in the High Court at Wellington against Foodstuffs North Island.
It alleged that anti-competitive land covenants were lodged by the supermarket operator “with the purpose of blocking competitors from opening rival supermarkets at particular sites and developing existing ones at several locations across the lower North Island”.
The commission said Foodstuffs North Island had “entered into a settlement to resolve the proceedings on terms acceptable to both parties”, which means the role of the court will essentially be to decide whether to approve the undisclosed penalty.
Commission chairperson John Small said that while historical, the commission considered the conduct to be serious enough to warrant proceedings under the Commerce Act.
“This is a vital $25 billion sector, which impacts every Kiwi consumer.
“The covenants were of long duration, and we allege were lodged with the purpose of hindering competitors in local towns and suburbs where Kiwi consumers buy their groceries,” Small said.
Commenting on the commission’s decision to close the parallel investigations into Woolworths NZ and Foodstuffs South Island, a commission spokesperson said “the strength of the evidence against each party and the nature of their conduct was the primary consideration in not taking proceedings”.
“However, we also had regard to whether further proceedings would achieve any additional general or specific deterrence given all grocery covenants have already been made unenforceable and illegal via legislation and we had decided to take proceedings against Foodstuffs North Island,” she said.
Foodstuffs North Island said in a statement that it had “co-operated fully with the commission’s investigation”.
“The matters the settlement relates to originated before Foodstuffs Wellington merged with Foodstuffs Auckland in 2013. While there was no intent to act unlawfully, we acknowledge that restrictive land covenants in some locations had the purpose of lessening competition in terms of the Commerce Act,” it said.
“We never sought to enforce the covenants and, in 2015, Foodstuffs North Island sought to improve its processes to ensure no further restrictive land covenants were lodged for the purpose of preventing competitor activity,” it said.
“In 2021, we voluntarily started lifting any covenants that remained and by January 2024 had removed all those registered against any land we own.”
A spokesperson would not say whether Foodstuffs intended to apologise to consumers for the covenants, explaining it couldn’t go beyond its statement while the matter was still before the courts.