Code to crack supermarket bully tactics

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Last updated 05:00 23/02/2014

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Emulating Britain's code of conduct to prevent giant supermarkets from bullying suppliers is being touted as a way to ensure fairness in New Zealand.

That's the Green Party's solution to repeated allegations of suppliers being bullied by Countdown, which owned by Australia-based Woolworths.

The Greens will insist on the code should it be asked to join a coalition to form the next government.

But the UK code, which the Greens modelled its policy on, had a tortuous birth. It followed a series of investigations by British competition authorities which found the giant chains of Tesco, Sainsbury, Waitrose, Asda and others were fierce negotiators with powerful market positions.

It turned up little evidence of abuse of power or consumer detriment. However, ongoing concerns about the four largest supermarkets which held three-quarters of the market, led to the code of conduct being put in place in 2001.

That's despite no formal complaints from suppliers, though some claimed a culture of fear prevented them from speaking out.

A 2005 audit of compliance with the code found "little evidence of bad behaviour by supermarkets". A further investigation in 2008 drew similar conclusions.

Against that backdrop, UK politicians ploughed on with a tougher code in the face of opposition from the supermarkets.

In the middle of last year Christine Tacon, a former commercial director for Anchor, was appointed adjudicator to ensure there was "no bullying" of suppliers and that retailers stuck to their contracts without making opportunistic demands for payments.

It was a political solution to a perceived problem. There were accusations but little hard proof.

Peter Mitchell, editor of Supermarket News, said that describes the debate here sparked by Labour MP Shane Jones under parliamentary privilege.

For all the accusations no suppliers have gone public. Mitchell believed the Commerce Commission inquiry into the allegations against Countdown will find the same as the UK competition authorities did - evidence of fierce negotiating but nothing illegal.

"It's business as usual. This has been going on for the past 40 years," he said.

But Katherine Rich, executive director of the Food & Grocery Council representing suppliers, has a different view. "The culture has changed," she said.

For many years New Zealand's size meant people on both sides of the negotiating table played fair because they didn't want to burn bridges but, she said, Australian tactics had arrived.

"My take on it is the grocery culture has to change," she said.

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Progressive, in a written response to its view on a code and adjudicator said: "Any initiative would need to have buy-in from the whole retail industry and not add complexity or cost for New Zealanders."

Arguments against a code include that it won't change the power imbalance between the supermarkets and suppliers and that if specific practices are outlawed, contracts will simply get rewritten next time around, resulting in the same profit split.

The experience in Britain also suggests suppliers will remain too afraid to complain.

Former Green MP Sue Kedgley, who first championed a code, says the code's existence in the UK has led to improved supermarket behaviour.

Rich, who visited Britain to study changes there, agrees.

"One of the things my colleagues in the UK reported was, almost immediately, there was a change in the supermarket cultures because of the existence of the code."

And, she said, even the recent bad publicity has resulted in changes of behaviour by the supermarkets here.

"Some of my members are reporting that some of their meetings are now all sweetness and light."

In Australia, under intense political pressure, the supermarkets agreed to write up their own code of conduct.

It was finalised in November and is now being reviewed by the Australian Competition and Consumer Commission and the Australian Government for inclusion in the Competition and Consumer Act.

The Australian code has much in common with the UK one, binding supermarkets to fair dealing and limiting their ability to unilaterally vary contracts, de-list suppliers, or require suppliers to make payments for things like shoplifted goods (shrinkage) and goods going off (wastage).

It also includes not being able to demand payments for "past losses" as Jones has alleged Countdown did. That has been categorically denied by Dave Chambers, the boss of Countdown's New Zealand parent, Progressive Enterprises.

Kedgley said if a similar code was introduced here it would need an adjudicator.

"Ultimately, if you are going to have a code, somebody has got to enforce it."

ONLINE SUPERMARKET AIMS HIGH

An online supermarket founded by nappy entrepreneurs is aiming to take a chunk out of the market dominance of the big two chains - Progressive Enterprises and Foodstuffs.

Just as UK online supermarket Ocado has risen to take a growing share of the British grocery trade, Supermarket Online has its sights set high in New Zealand, and received a boost from a falling out between Countdown (owned by Progressive) and one of its "suppliers".

Consumers have waited in vain for another big supermarket chain to launch in opposition to Progressive (owner of Countdown, Freshchoice, Supervalue and Woolworths) and Foodstuffs (owners of New World, Pak n' Save, Four Square), which together have more than 90 per cent of the New Zealand grocery market.

German budget supermarket Aldi appears to have flirted only with the idea of coming into this country and The Warehouse's ambitions on this front have faded since Progressive and Foodstuffs each took about a 10 per cent shareholding.

But Supermarket Online hopes to grow without building bricks and mortar stores just as Ocado has done, which is a pure online supermarket and now claims to have around a one per cent market share in some areas of England.

Supermarket Online launched last September out of a successful ten years' of running bulk nappy delivery company nappies.co.nz, said co-founder Kevin D'Ambros-Smith. Just before Christmas, it got a big fillip as a result of a fallout between Countdown and one of its "suppliers".

The dispute saw Countdown end a deal which allowed holders of Christmas-savings club Hampsta cards, which are operated by a company linked to The Mad Butcher, from using the cards in its stores.

Details of the dispute, which came as Countdown and The Mad Butcher traded advertising blows, have not been made public, and even the usually outspoken Michael Morton, Mad Butcher chief executive, won't speak about it.

But Hampsta turned to Supermarket Online as a place where its cardholders could go for their groceries.

D'Ambros-Smith said that was both a big boost and a challenge, for the fledgling online supermarket, which delivers "dry goods" like cleaning goods, toiletries, toilet paper, canned and other pantry items to homes across Auckland. It uses third party couriers for a delivery fee for up to 25kgs of groceries is $3.99 (It costs more to deliver outside of Auckland. Delivery is free for those spending over $200.

D'Ambros-Smith is also opportunistically hoping to pick up business from shoppers turned off by the allegations made in Parliament about Countdown's behaviour to its suppliers, something the supermarket chain has denied and is now subject to a Commerce Commission investigation.

- Sunday Star Times

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