Commerce Commission To File Proceedings Against Foodstuffs North Island And Gilmours, Alleging Cartel Conduct
The Commission investigated agreements that FSNI and Gilmours entered into with a national grocery supplier regarding the supply of products to a hospitality customer.
The supplier and the customer both have considerable volumes of business with FSNI/Gilmours. When FSNI/Gilmours discovered the supplier and customer had established a direct trading relationship, they persuaded the supplier to re-route that business through them.
Commerce Commission Chair, Dr John Small, says the Commission believes FSNI and Gilmours engaged in cartel conduct which is a breach of section 30 of the Commerce Act.
'We take allegations of cartel conduct very seriously. Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly,' Dr Small says.
'In this instance, the supplier wanted to provide a competitive supply channel, but this was stopped by the agreement with FSNI and Gilmours.
'We do not tolerate this kind of behaviour and will not hesitate to take court action, where appropriate,' Dr Small says.
The Commission is also filing proceedings against FSNI and Gilmours under GICA.
The Commission believes FSNI and Gilmours obstructed the supplier's ability to sell groceries to the customer in question, and did not deal with the supplier in good faith.
Grocery Commissioner, Pierre van Heerden, says this behaviour could be in breach of the Grocery Supply Code.
'The Grocery Supply Code was introduced to address the power imbalance between the major supermarkets and their suppliers,' Mr van Heerden says.
'The major supermarkets are the largest customers for most grocery suppliers. This creates a reluctance for suppliers to call out bad behaviour or push back on the supermarkets for fear of damaging relationships or losing access to supermarket shelves.
'The Commission is acutely aware of the risk suppliers may face coming forward and has ways to protect their identity and business. We have anonymous reporting tools for cartels and GICA and encourage anyone concerned to use these ways of contacting us,' Mr van Heerden says.
As this matter will soon be before the Court, the Commission will not be providing further comment on the case at this time.
Background
Cartel conduct
A cartel is where two or more businesses agree not to compete with each other. Cartel conduct can take many forms, including price fixing, allocating customers, rigging bids or restricting the output of goods and services.
Because cartels can harm the interests of consumers - goods and services become more expensive, consumers end up with fewer choices, and quality and service levels are likely to deteriorate – tackling cartels is one of the Commission's key enforcement priorities.
Grocery Supply Code
New Zealand's mandatory Grocery Supply Code was introduced under the Grocery Industry Competition Act 2023. The Supply Code was created to increase transparency and certainty for suppliers through a set of rules supermarkets need to follow when dealing with suppliers. Bringing increased certainty to agreements between supermarkets and suppliers is intended to give suppliers more confidence to innovate and invest in more choice for consumers.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NZ Herald
7 hours ago
- NZ Herald
Government should cut GST on food if it's worried about butter price – Fran O'Sullivan
The Finance Minister did not need to call Hurrell in to reaffirm that global dairy prices are at a high and that this would inevitably spill over to higher farmer returns and, in turn, boost regional and finally national economies. (That's the plus side you didn't hear about before the meeting). Or that any notion of Fonterra slashing its own margins was not going to happen. They are thin when compared with the margins applied by supermarkets to dairy products, and she knows it. The upshot is that Willis did seek explanations from Hurrell over the co-operative's pricing, which she of course accepted. Within days, she was talking up Fonterra and the surging global prices on the Mike Hosking show as a plus – as indeed they are when it comes to the impact on the New Zealand economy. Hurrell subsequently made it clear his company is not moving to a two-tiered pricing system: an export price geared to global prices and a subsidised price for domestic consumers. There was more besides. It was sensible for Fonterra to shut the issue down quickly. It currently has its consumer brands business on the market. Any suggestion of a move to a two-tiered system would be a complication to that sales process or indeed an IPO of that business if that ultimately turns out to be the Fonterra board's preferred option. But while there was an element of the performative to the Beehive shenanigans, it does underline how much 'cost of living' issues are a lightning rod when it comes to sparking domestic dissatisfaction with the Government. Willis later described her meeting with Hurrell as 'constructive and engaging', underlining the fact that Fonterra does not control retail prices and that the final price is set by supermarkets, whose contracts and pricing strategies vary. This was more grist to Willis' campaign against what she claims are supermarkets profiteering at the expense of consumers. Already, she has been working to reduce the barriers to entry for other competitors. Willis has been encouraged that the Commerce Commission has taken a case against grocery giant Foodstuffs North Island and Gilmours Wholesale to court over what it believes is cartel conduct. The regulator said civil proceedings would be filed against the big grocery suppliers under the Commerce Act and Grocery Industry Competition Act (GICA). Foodstuffs 'strongly denies' any unlawful conduct. The Commerce Commission has also levelled criminal charges against retailer Noel Leeming over what it claims is a misleading price-matching promotion. The company 'firmly' maintains it had not committed an offence and would vigorously defend itself against multiple charges of misleading customers under the Fair Trading Act. Put that to one side. Prices have escalated on multiple fronts: dairy products, meat and some fruits; electricity and gas, rates, insurances. But they have decreased on others: mortgage and loan interest rates, and some fuels. There is little point in trying to jawbone prices down. In many respects, the answer lies with Willis. If she is overly concerned, she could wipe the 15% GST from particular food items. This is the case in Australia, where its 10% GST does not apply to meat, fish, produce, cheese and eggs, plain milk and cream, bread, butter and other spreads, bottled water, tea and coffee, cooking ingredients and oils, or infant formula. In Britain, most foods are zero-rated. Many European countries have reduced value-added tax rates for food, typically running at 5%-7%. Basic foods are exempted in Singapore, there is an 8% rate in Japan, and in the United States some states exempt various food items from sales tax. The upshot is that New Zealand verges on being an outlier in this area. Any changes to the GST regime would, however, have an impact on how New Zealand's tax regime is perceived as being neutral. Farmers are not the enemy. There is much to celebrate from our rural sector, which will deliver nearly $60 billion in export earnings this year. The fixation on rising prices has also overly consumed the Prime Minister, who frequently talks about 'cost of living issues'. But this is not going to be solved in the medium term. The upshot is that, short of any intervention by the Government, consumers will just have to suck it up.
RNZ News
a day ago
- RNZ News
Local food delivery company struggling against competition
business food 36 minutes ago Getting food delivered to the door has become a huge business, and in one New Zealand town the competition between two operators has led to complaints to the Commerce Commission. Nelson's Yummi food delivery business launched a decade ago but in recent years it has struggled. Two years ago another Kiwi-owned nationwide company, DeliverEasy, Yummi began losing clients. Yummi founder George Evans spoke to Melissa Chan-Green.
Scoop
a day ago
- Scoop
What You Need To Know About A 150,000-Customer Banking Class Action
ASB and ANZ have rejected an offer to settle a class action suit against them, for about $300 million. Instead, the legal drama continues - and now the country's lawmakers are involved, too. So what is the class action suit actually about, and what's happening now? What does the class action claim? The class action is for breaches of the Credit Contracts and Consumer Finance Act (CCCFA). Between 2015 and 2019, the law said that a lender that was in breach of its disclosure requirements had to repay borrowers all the interest and fees they were charged during the time when they were not compliant with the rules. The class action claims that between 30 May, 2015 and 28 May, 2016, a coding error in one of ANZ's systems failed to take into account interest that had been accrued and not yet charged. As a result, loan variation letters contained incorrect information. ANZ said it meant customers were undercharged. The class action also claims that between 6 June, 2015 and 18 June, 2019, ASB did not ensure customers received variation disclosure when they requested changes to repayment amounts, dates or frequency, over the phone or in branch. They also say ASB did not provide customers with compliant variation disclosure when requesting other kinds of changes. It has been estimated that, if banks were to lose in court, more than 150,000 customers could be reimbursed a combined total of hundreds of millions of dollars. Customers have been added to the class action on an "opt out basis". All ASB and ANZ customers the court determines to be affected will be represented unless they choose not to be. The action has been in progress for about four years and University of Auckland senior law lecturer Nikki Chamberlain said it was the biggest consumer class action she was aware of in New Zealand history. Haven't the banks already made amends? The banks have already compensated affected customers after reporting the breaches to the Commerce Commission. ANZ first paid customers about $6 million. The Commerce Commission investigated and the bank admitted a breach of its responsible lending obligations and agreed to pay customers another $29.4m. ASB agreed to pay just over $8m. What is the law change? The Credit Contracts and Consumer Finance Amendment (CCCFA) Bill, which is before select committee, includes a retrospective fix that would mean instead of a blanket penalty applying for disclosure breaches between 2015 and 2019, a court would be allowed to decide what compensation was "just and equitable". In 2019, the law was amended to apply to breaches from that point, but this change would apply to breaches before that time, too, if they had not been dealt with by a court already. What's the criticism? "Changing the law creates a dangerous precedent for everyone and exposes the plaintiffs to more cost and delay, as well as introducing uncertainty to their established claim," said Scott Russell, the lawyer leading the banking class action. Chamberlain said many consumer protection laws were punitive rather than compensatory. "The reason we have punitive remedial provisions in these consumer-based legislations is to incentivise big players like the banks to invest in their compliance systems. Otherwise what would be the motivation for the bank to invest in their systems? Their money is better spent in growing their lending portfolio… so there's this idea that we want to incentivise banks to self-regulate to some extent. "We want them to be having good practises and disclosing what they need to be disclosing in their lending documents to customers and we need to have punishment that's severe enough they take notice." She said the change could make it uneconomical to pursue the case, and could put litigation funders off from taking action in future in other scenarios. "If you change the remedial provision retrospectively, you are going to increase the cost of evidence that is required and the legal fees required because you're going to have to go through every single breach for every single customer, and go through the factors and that's going to blow the cost out which might make the litigation uneconomical and unviable. "Litigation funders have been funding it. Litigation funders are a good thing. Yes, they do take a percentage on a no win, no fee basis. But what litigation funders do with class actions is they make claims which would ordinarily be uneconomic to pursue economically viable." She said the defendants could use the fact there was a power disparity between them and plaintiffs to their advantage, but litigation funders helped to offset that. "One of my bigger concerns is about the rule of law, retrospective legislation in general is something that is not well looked upon. "In fact, it should not be enacted unless there are extraordinary circumstances. Why is that? Because we need certainty in the law. If people can't rely on the rights and remedies provided by the law at the time of breach, then there's uncertainty in the law and it will absolutely impinge on the integrity of the legal system. And eventually, democracy itself, because it goes to us being able to rely on what our rights are… why would a funder enter the market if there's a concern that big powerful organisations who are defendants in active litigation can lobby the government and they just change the law midway through the proceeding, in their favour?" It would be possible to put a long stop limitation provision in the law to prohibit any future litigation under the old rules, she said, if the concern was about the future liability of other lenders. What do banks say? But Roger Beaumont, chief executive of the New Zealand Banking Association, said the change was needed. "Between 2015 and 2019 any lender who even made a small mistake in the information provided to borrowers, like getting their phone number wrong, could be subject to a draconian provision in the law that, on one interpretation, would make them repay all the interest and fees paid until the error was corrected. That consequence would be totally out of proportion with the technical legal breach, especially if there was no harm to the consumer who was happily enjoying their new home or car thanks to a bank loan. "Modelling from the Reserve Bank shows a potential risk to the financial system of $12.9 billion. The Reserve Bank considered more extreme variations that 'were much more severe' but didn't publish them as they were too 'speculative'. A financial system risk much worse than $13 billion should be concerning to everyone." He said the change would also benefit smaller lenders who could not absorb the cost of legal action. Banking expert Claire Matthews, from Massey University, said if the claim were successful, there was a risk that litigation funders might see it as a way to make money. "They could be exploring other opportunities to see if there is something else that somebody had done." She said the law as it stood "significantly advantaged customers" and "almost encourages them to find a mistake. If you can find that somebody's made a mistake, and let's face it, people do make mistakes from time to time, you could have a very small mistake which is what was the case here and suddenly you don't have to pay any interest for the whole time of the loan? That to me just seems a bit unusual". The Commerce Commission had the ability to apply punitive damages if it had considered it appropriate, she said. Retrospective legislation was not uncommon. "It's kind of two different arguments. Maybe it's bad, but it's happened often enough that suggests that in certain circumstances, it's not unreasonable to do in this case." What settlement offers have been made? Claimants in the class action last week offered to settle for more than $300 million. But both banks rejected it. The offer included a cap on liability that was the lesser of either 68 percent of what customers paid in borrowing costs during the breach period, or a small percentage of bank profits. For ANZ the percentage was 3.5 percent of profits from FY16 through FY19. While ASB's offer was 5 percent of profits during the same period. ANZ described the offer as a stunt. Matthews said if the law change went ahead it would have a big impact on the case. "I'm not sure that it would completely kill the case but it would have a substantial impact. I think there would be potential for the case to still progress but the associated penalties and the impact of a decision in favour of the applicants would have less benefits for them and therefore the litigation funders might decide it was no longer worth their while to purse it because the costs would be too great."
