Grocery Industry Competition Act 2023

The Grocery Industry Competition Act 2023 is a principal New Zealand Act aimed at the grocery sector. Its purpose is to promote competition and efficiency in the grocery industry for the long-term benefit of consumers.

The Act gives the Commerce Commission a broad role. That includes monitoring competition and efficiency, carrying out inquiries and reviews, acting as the sector regulator, issuing warnings and reports, making determinations, monitoring compliance and taking enforcement action.

This is not a single-rule law. It creates a wider framework that can affect supply relationships, wholesale access, dispute handling, disclosure, and enforcement. Some parts apply immediately to regulated grocery retailers. Other parts allow more detailed regulation to be added later through determinations, regulations or Orders in Council.

The Act does not treat all grocery businesses the same way. The clearest direct duties in the Act fall on regulated grocery retailers. Those are grocery retailers that have grocery supply code obligations under Part 2, wholesale supply obligations under Part 3, or both.

The Act also recognises group structures. In the wholesale supply part, it deals with groups, interconnected bodies, franchisees and transacting shareholders. It says the main regulated grocery retailer must take reasonable steps to ensure compliance, and it includes a defence where certain related entities reasonably rely on the main regulated grocery retailer.

Suppliers and wholesale customers are not subject to every duty in the Act. But they can still be directly affected. For example, suppliers may need to comply with a wholesale code if one applies. Wholesale customers may also have duties under a wholesale code and must comply with requirements that facilitate the operation of additional regulation.

Many smaller businesses are affected indirectly rather than as the main regulated party. That includes independent retailers, dairies and specialty stores that buy through wholesale channels, and suppliers negotiating with major supermarket groups.

The Act becomes relevant at ordinary trading moments. A business does not need to be in a court case before this law matters. It can be triggered when a wholesale customer asks for supply, when a retailer sets wholesale terms, when a supply relationship is documented, when a dispute is referred, or when the Commission asks for information.

For regulated grocery retailers, the wholesale supply part is especially practical. It deals with how wholesale requests are handled, what systems and procedures must exist, how pricing is presented, and what conduct is not allowed in trading relationships.

For suppliers and wholesale customers, the key trigger is often a change in the relationship with a regulated grocery retailer. That might be a new wholesale request, a variation or cancellation of a wholesale agreement, a dispute about supply terms, or the introduction of a wholesale code or disclosure standard.

Part 3 sets out the main framework for wholesale supply of groceries. It starts with the purpose and principles for that part, then imposes duties on regulated grocery retailers about facilitating commercial agreements for wholesale supply.

The Act says a wholesale customer may make a wholesale supply request. A regulated grocery retailer must consider that request in good faith. That is one of the clearest practical duties in the Act.

The Act also requires a regulated grocery retailer to establish and implement rules, criteria and procedures for considering wholesale supply requests. It must also comply with ongoing duties relating to those rules, criteria and procedures.

In addition, a regulated grocery retailer must establish and implement standard terms and conditions and principles for wholesale supply, and comply with ongoing duties relating to them. The Act also requires notification to the Commission of a wholesale supply request, and notification of variation or cancellation in the circumstances covered by the Act.

Transparency is another major theme. A regulated grocery retailer must ensure transparency of wholesale agreements and transparent pricing under wholesale agreements. It must also put in place systems and processes for wholesale supply.

The Act goes further by requiring a regulated grocery retailer to ensure that its wholesale agreements and conduct do not hinder or obstruct trading relationships. It also says a regulated grocery retailer must not engage in certain conduct relating to supplier discounts, payments or rebates.

The Act creates more than one regulatory layer. Part 2 deals with the grocery supply code. Section 19 is the obligation to comply with that code. The Act also allows the Commission to make determinations for the purposes of Part 2, including the grocery supply code, and the code may extend to related parties of regulated grocery retailers.

Part 3 allows additional regulation for wholesale supply. The Commission may make determinations requiring one or more regulated grocery retailers to establish, implement and maintain a wholesale framework. It may also set out a grocery wholesale industry participation code, called the wholesale code.

The wholesale code is important because it can impose duties not only on regulated grocery retailers, but also on wholesale customers. The Act also states that regulated grocery retailers and suppliers must comply with the wholesale code, if one applies.

Additional regulation can be developed in different ways. The Commission may carry out an inquiry into whether additional regulation should apply and what kind would be most cost-effective. The Minister can require an inquiry in writing, and the Commission can also start one on its own initiative.

After an inquiry, the Commission must prepare a report, publish a draft for comment, finalise the report, give it to the Minister and later publish it. The Minister must have regard to recommendations and publish the Government’s response. The Act also allows some additional regulation to be imposed by Order in Council, including non-discriminatory terms and specified access terms regulation.

Because of this structure, businesses should not assume the compliance position will stay static. A business may move from being affected only indirectly to having direct obligations under a code, framework or other additional regulation.

The Act includes a dispute resolution framework for certain disputes involving suppliers or wholesale customers. A supplier or wholesale customer may refer certain disputes to a dispute resolution scheme. The classes of eligible disputes can also be prescribed by regulations.

Once a dispute is referred, other proceedings are stayed unless a court or tribunal orders otherwise. Regulated grocery retailers must comply with the rules of the dispute resolution scheme, and the District Court may order compliance with those rules.

The Act also says parties may not contract out of the dispute resolution scheme. Binding decisions must be made in accordance with principles of law, and there are provisions dealing with enforcement of settlement agreements, enforcement of binding decisions, appeals and preliminary points of law.

Schedule 2 sets out what the rules of an approved scheme must cover. Those rules must explain how disputes are referred, what processes are offered, and include at least one determinative process that results in a binding decision.

The rules must also support natural justice, low formality and technicality, confidentiality, and compliance with reasonable requests for submissions, documents or other information. The schedule states that disputes must be resolved within 25 working days after referral, unless the parties agree to more time or more time is allowed under the scheme.

The Commerce Commission has a central role under this Act. It can monitor compliance, investigate conduct, issue warnings, make determinations, carry out inquiries and take enforcement action.

For compliance monitoring, the Act allows the Commission to require information from participants. That can include a written statement about whether a participant has complied with a duty, an auditor or assurance practitioner report, enough information to determine compliance, and a director-signed certificate confirming the truth and accuracy of information provided.

The Act also applies investigation and information-gathering powers. The Commission may investigate how effectively and efficiently participants facilitate supply, examine activities and financial matters over the previous 7 years, and require documents, information, forecasts, forward plans, answers to questions and expert opinions.

The Act creates offences relating to some investigation and information-gathering powers. Businesses should take any formal request seriously and make sure records are complete, accurate and preserved.

The Act also gives the Commission power to issue corrective notices and to require a warning to be disclosed. A disclosure notice can require a warning to be prominently displayed on websites or included in specified documents or communications. Before using these powers, the Commission must follow procedural steps, including written notice and an opportunity to make submissions and be heard.

The Act provides a civil enforcement regime. Available remedies include pecuniary penalty orders, declarations of contravention, compensatory orders, orders varying or cancelling contracts, and injunctions.

The High Court may make a pecuniary penalty order on the Commission’s application if a person has contravened a civil liability provision, attempted to contravene one, or been involved in a contravention.

The Act identifies the civil liability provisions.

They include section 19 on the grocery supply code, sections 35 to 47 on facilitating commercial agreements for wholesale supply, sections 69, 71 and 72(3) on wholesale frameworks, section 76 on the wholesale code, section 86 on non-discriminatory terms or specified access terms regulation, section 118 on corrective notices, section 121 on disclosure of warning, section 188 on specified exemption conditions for collective negotiation, and section 190 on disclosure standards.

The Act uses four penalty tiers. The maximum penalty depends on which provision has been breached and which tier applies. Because the penalty structure is provision-specific, businesses should not assume one maximum figure applies across the whole Act.

Separate from civil liability, the Act also creates offences relating to some investigation and information-gathering powers. That means a business can face both operational disruption and legal exposure if it mishandles a Commission process.

This Act sits alongside other New Zealand laws. It applies parts of the Commerce Act 1986 to enforcement, remedies, appeals and miscellaneous matters. It also includes a power to exempt some collective negotiation arrangements from sections 27 and 30 of the Commerce Act, subject to regulations and conditions.

If an exemption for collective negotiation is granted, the agreement must not contain a prohibited provision. The Act says a prohibited provision includes one that has the purpose, or has or is likely to have the effect, of preventing, restricting or limiting supply from a party to a regulated grocery retailer, or preventing, restricting or limiting a party from entering into an agreement with a regulated grocery retailer other than in accordance with the collective negotiation agreement.

The Act also amends the Fair Trading Act 1986. Schedule 3 deals with how the updated unfair contract terms rules apply to certain trade contracts. In broad terms, whether the old or new rules apply can depend on when the contract was entered into and whether it was later varied or renewed.

If your business uses standard form supply or wholesale contracts in the grocery sector, it is worth checking both this Act and the wider Commerce Act and Fair Trading Act position before relying on existing templates.

The Act received Royal assent on 26 June 2023. It generally came into force on the 14th day after Royal assent, which was 10 July 2023.

Section 19, which is the obligation to comply with the grocery supply code, had a separate commencement rule. It was brought into force on 28 September 2023 by the Grocery Industry Competition Act Commencement Order 2023.

Before acting, businesses should check whether any later determinations, regulations, Orders in Council, disclosure standards, approved scheme rules or amendments have changed the practical compliance position since those commencement dates.