The warning came after the committee analyzed the assortment review processes of all major supermarkets.
photograph: Samantha Gee/RNZ

The Trade Commission has warned Woolworths New Zealand of what it believes may be a breach of the Food Industry Competition Act following a review of the supermarket giant’s product delisting process.

The warning came after the European Commission analyzed the assortment review processes of all major supermarkets and assessed whether they were meeting their obligations under the Grocery Supply Standard.

As part of the assortment review, supermarkets will assess which products they will continue to stock. In some cases, products may be “delisted,” or removed from shelves.

The updated food supply code is scheduled to come into effect on May 1st. The revised code will give suppliers a clearer right to challenge delisting decisions and increase transparency in their dealings with major supermarkets.

Violation of this Code constitutes a violation of the Food Industry Competition Act.

Dr Alice Hume, head of the Commerce Commission’s grocery division, said Woolworths, Foodstuffs North Island and Foodstuffs South Island together controlled about 82 per cent of New Zealand’s grocery market. She warned that losing access to supermarket shelves could effectively become a dead end for small suppliers.

“The potential for products to be removed from shelves weighs heavily on suppliers, potentially further reinforcing the power imbalance between large supermarkets and smaller suppliers,” Hume said.

“The risk of losing market access could lead to suppliers accepting terms that are less favorable to them, leading to a lack of trust in how supermarkets make decisions.”

During the Committee’s review, it identified and investigated instances where it considered there was a risk that Woolworths would be unable to meet its obligations under the Code.

The commission said it had alerted Woolworths to conduct it believed may be in breach of the law, noting that only a court could determine whether a breach had occurred.

Woolworths has since updated its processes to meet its obligations, the commission said.

In response, Woolworths issued the following statement:

“We take our obligations under the Food Supply Code seriously and are proud of our strong relationships with our suppliers.

“We work hard to ensure we comply with all of our obligations under the Code and if we become aware of any potential issues we will rectify them as soon as possible.

“When the code first came into effect, we reviewed and updated all of our templates, but the committee raised concerns about whether one of the template letters contained specific language required by the code.

“We fully cooperated with the commission’s investigation and have updated our template letter in light of the commission’s views.”

level the playing field

Mr Hume said the updated regulations play an important role in leveling the playing field between large supermarkets and smaller suppliers, and the European Commission takes compliance seriously.

He said scope review remains an ongoing area of ​​focus for regulators.

Hume also urged suppliers to come forward if they have concerns about possible delisting or other unfair treatment.

“You can contact the commission directly or through the anonymous reporting tool on our website.”

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