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“Unjustified” – Foodstuffs’ Quin doubles down in new ComCom submission

8th December 2021 By Staff Reporter | news@foodticker.co.nz | @foodtickernz

Foodstuffs is continuing its campaign against a major shake-up of the $22bn grocery sector, making a last-ditch attempt to sway the outcome of the Commerce Commission’s market study into the retail grocery sector.

FSNI CEO Chris Quin

In a statement on Tuesday outlining Foodstuffs North Island’s final submission to the watchdog, chief executive Chris Quin argued the most dramatic of the commission’s draft report recommendations, such as wholesale separation or forced divestment of retail stores were not justified.

This is a position the co-op has held since the draft report was released in July, which concluded that an effective supermarket duopoly between Foodstuffs and Countdown resulted in a lack of competition in the sector.

But Quin said its final submission included “additional information and analysis” to back up its case, particularly regarding the contentious issues of profitability and competition.

FSNI’s submission was lodged with the commission by 23 November but has not yet been made public.

“The market study process has been focused only on the supermarkets part of the industry and allowed a variety of voices to be heard and claims to be made,” Quin said.

“However, as we enter the final stages of the process it is clear that the more radical options being proposed are not supported by credible evidence and need to be reviewed by the commission in its final report.”

On profitability, Quin said FSNI had provided additional information with support from expert economists to demonstrate its returns are less than half of what the draft report states.

He took issue with the commission’s “incorrect” treatment of the vertically-integrated group as two separate businesses.

“If you think about the co-operative like a human body, we have a central nervous system comprised of our distribution centre, supply chain, support centre and other shared services, which supplies everything to the limbs ie, our retail stores. One part can’t operate without the other.”

On competition, Quin said the extra information and data supported a conclusion that the retail grocery sector is “workably competitive and there are not material barriers to entry or expansion”.

Finally, Quin repeated an argument that he made over the series of commission conferences that started in late October, in that the options of forced divestment or forced structural separation of existing market participants would be unprecedented in New Zealand’s economic history.

“To be justified, the competition problem these remedies would be designed to solve would need to be of unprecedented severity, and could only be turned to when other, lesser remedies have been tried. Our final submission clearly demonstrates why we are nowhere near that threshold.”

FSNI’s final submission was also said to contain an “update on its action plan to deliver better outcomes for New Zealand consumers.”

The action plan was launched in the wake of the release of the draft report and saw the supermarket make a number of concessions regarding its activity in the sector, such as agreement to participate in the development of a Grocery Code of Conduct, the release of land covenants, and pricing simplification.

The Commerce Commission is set to publish its final report into the sector by 8 March 2022.

 

 


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