Commerce Commission Outlines Foodstuffs Merger Issues

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ComCom outlines Foodstuffs merger issues

The Commerce Commission has released a list of early concerns regarding Foodstuffs’ application to merge their North and South Island businesses.

The statement outlines the key competition issues that the Commission considers important in deciding whether or not to grant clearance to the proposed acquisition.

The Commission is seeking feedback from interested parties about the anticipated effects of the proposed purchase on competition.

Email submissions should be submitted to registrar@comcom.govt.nz with the subject line “Foodstuffs merger.” Submissions must be submitted by the end of business on February 1, 2024, for consideration.

The Commission is set to decide on the application by 5 March 2024, but this date might be extended as the investigation progresses. The plans, which have been in the works for a while, can be further explored in detail on Canterbury Today under Foodstuffs Propose Operational.

A Deeper Look at the Commerce Commission’s Concerns

Through publishing the statement of preliminary issues, the Commerce Commission aims to increase process transparency, provide interested parties with an opportunity to submit on further competition issues that may arise and gather further information that might assist their investigation.

ComCom has stated the merger decision will come down to whether they were satisfied the merger would not substantially lessen competition.

Factors they’re considering include the extent of current competition, the degree sales would expand if prices increased, and how new competitors would enter the market and compete if prices increased, quality reduced, and innovation declined.

The commission is also asking if other elements of service or competition would be reduced, like if there would be worse and fewer promotions.

Food prices increasing has been a major component of rising living costs in New Zealand for some time now. According to a recent article on Canterbury Today, there are indications that food inflation is finally slowing down.

Under Foodstuffs North Island comes Pak’nSave, New World, Four Square, and wholesaler Gilmours.

Foodstuffs South Island encompasses New World, Pak’nSave, Four Square, Raeward Fresh, On the Spot, and wholesaler Trents.

The Bigger Picture

Many economists are worried about the merger and think it could hurt shoppers and smaller businesses. Smaller grocers are worried about being squeezed out by the mega-Foodstuffs and want the Commerce Commission to block the merger.

Consumer groups are urging ComCom to ensure shoppers still have choices and fair prices if the merger goes ahead. Foodstuffs insist the merger will actually lead to lower prices for shoppers because of savings and efficiencies.

The Grocery Commissioner, Pierre van Heerden, who was recently appointed, is still in office even though there has been a change in the government. Supermarkets are being encouraged to keep their prices low during the holiday

The Warehouse has their eyes on the developing situation. Chief executive Nick Grayston said in November that “while there may be efficiencies for them, it’s going to be an uphill battle to convince New Zealand customers that they will also benefit with the lower grocery prices that they deserve.”

The retailer has pushed back against moves in the grocery world as of late, with cheap eggs and Weet-Bix deals making headlines in the last year.

“The hold Foodstuffs have over wholesale access of supply and price is already significant, so we have concerns about the impact this move might have, and it’s likely to make our progress even harder. We need more competition in New Zealand, not less.”

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