Question for Oral Answer: Food Pricing - Inquiry

 26 June 2008

5. SUE KEDGLEY (Green) to the Minister of Commerce: Has she been advised that the Australian Competition and Consumer Commission is conducting an inquiry into grocery food pricing; if so, does she believe a similar inquiry might be useful here, given that in New Zealand two companies control 96 percent of the market, compared to Australia where a duopoly controls 80 percent of the market?

Hon LIANNE DALZIEL (Minister of Commerce): I am aware that the Australian Minister for Competition Policy and Consumer Affairs has required the Australian Competition and Consumer Commission to hold an inquiry into the competitiveness of retail prices for standard groceries, and that the commission is expected to report by 31 July this year. I will await the commission’s report before considering whether a similar inquiry would be useful in New Zealand.

Sue Kedgley: Does she agree with Consumer New Zealand that with a concentrated market dominated by a very small number of players, consumers need better information on whether the prices they are paying are fair, especially with rapidly rising food prices; and why will she not ask the Commerce Commission to initiate an inquiry, or hold a Government inquiry into grocery pricing?

Hon LIANNE DALZIEL: Having looked at some of the evidence that has already been presented to the Australian Competition and Consumer Commission inquiry, I think it would be useful to await its report before considering whether one would be appropriate here. Some of the evidence that has already been given in the commission’s inquiry suggests that profit margins are much higher in Australia than they are in New Zealand, despite the percentages that she identified in the primary question. I should also make the point that the Commerce Commission does not have general powers of inquiry, as the Australian Competition and Consumer Commission does, and it could carry out a price control inquiry only under the current Part 4 of the Commerce Act.

Hon Marian Hobbs: Has the New Zealand Commerce Commission recently considered any matters that may be relevant to competition in the grocery sector?

Hon LIANNE DALZIEL: The Commerce Commission looked at this matter in declining both applications by Woolworths and Foodstuffs to acquire the Warehouse. The commission considered that the Warehouse was an important source of potential competition in a sector otherwise characterised by a duopoly and high barriers to entry. The High Court overturned the commission’s decision, and this matter is now currently before the Court of Appeal. We should await the outcome of that appeal before drawing conclusions about the state of competition in the grocery sector in New Zealand.

Sue Kedgley: Is she concerned that supermarkets mark up staples, even those with a relatively long shelf life, like pumpkin and kumara, by as much as 195 percent for kumara and 286 percent for pumpkin; if so, does she agree that New Zealand would benefit from a code of conduct for supermarkets, such as already exists in the United Kingdom, aimed at making sure that farmers, producers, and consumers all get a fair deal?

Hon LIANNE DALZIEL: One of the concerns I would have about that approach is that New Zealand exports 80 percent of the food that we produce. It generates 50 percent of our earnings. We have to think of our exports as well when we are talking about prices at the supermarket.

Sue Kedgley: Has she seen reports that both the two big Australian supermarket companies have been accused by the Australian Competition and Consumer Commission of price-fixing practices that are “as close to being illegally collusive as we can find”, and is she concerned that one of those supermarket chains is also a dominant player in the grocery industry here in New Zealand?

Hon LIANNE DALZIEL: I am aware of the concerns that have been expressed, but, as I said before, I think it is more appropriate that we await the conclusions of the commission’s inquiry before we draw any conclusions in respect of New Zealand.

Sue Kedgley: I seek leave to table the groceries market investigation by the UK Competition Commission—·                          

Document, by leave, laid on the Table of the House.

Sue Kedgley: I seek leave to table papers from the Australian Competition and Consumer Commission inquiry.

Document not tabled.