The Commerce Commission, New Zealand’s antitrust regulator, has initiated legal proceedings against supermarket owner Foodstuffs North Island, accusing it of employing anti-competitive land covenants.
The regulator alleges that the covenants prevented competitors from establishing or expanding supermarkets across Lower North Island.
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The case emerged from a market study into the grocery sector, completed in March 2022, which highlighted the restrictive use of land covenants by major retailers.
The commission has settled with Foodstuffs North Island, with the High Court set to make further orders.
Commerce Commission chair John Small said: “This is a vital NZ$25bn ($15bn) sector, which impacts every Kiwi consumer. The covenants were of long duration, and we allege were lodged to hinder competitors in local towns and suburbs where Kiwi consumers buy their groceries.”
Foodstuffs North Island, alongside Foodstuffs South Island, operates the PAK’nSAVE and New World chains, forming a duopoly that has been linked to high grocery prices in New Zealand.
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By GlobalDataThe commission’s actions aim to dismantle anti-competitive barriers, facilitating market entry for other operators.
The New Zealand government has appointed a grocery commissioner to increase industry oversight.
Small added: “Land covenants have the potential to harm competition by raising barriers to entry or expansion in a market, making it harder for rival businesses to compete effectively and gain scale. Ultimately, the loser here is the Kiwi consumer who is deprived of the benefits that come from a more competitive market.”
In response to the allegations, Foodstuffs North Island agreed to cooperate with the investigation, according to Bloomberg.
A company spokesperson stated: “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. In 2021, we voluntarily started lifting any covenants that remained and by January 2024 had removed all those registered against any land we own.”
