The Commerce Commission said the supermarket chain did not deal with the supplier in good faith. Photo: 123RF
The Commerce Commission is taking Foodstuffs North Island and its subsidiary Gilmours Wholesale to court over what it believes is cartel conduct.
The regulator said it would shortly file civil proceedings against the big grocery suppliers under the Commerce Act and Grocery Industry Competition Act (GICA).
The regulator said the parties pressured a supplier into an agreement to redirect supply through them.
Commission chair John Small said the commission took allegations of cartel conduct seriously.
"Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly," Small said.
"In this instance, the supplier wanted to provide a competitive supply channel, but this was stopped by the agreement with FSNI and Gilmours.
"We do not tolerate this kind of behaviour and will not hesitate to take court action, where appropriate."
In a statement, Foodstuffs North Island denied wrongdoing.
"Foodstuffs North Island and our stores are committed to complying with all our regulatory obligations, and we co-operated fully with the Commerce Commission throughout their investigation of this matter," a spokesperson said. "We strongly deny any unlawful conduct."
"As this matter will be before the court in due course, it would not be appropriate to comment further at this time."
In addition, the commission said the parties did not deal with the supplier in good faith.
Grocery commissioner Pierre van Heerden said that behaviour could be in breach of the Grocery Supply Code.
"The Grocery Supply Code was introduced to address the power imbalance between the major supermarkets and their suppliers," van Heerden said.
"The major supermarkets are the largest customers for most grocery suppliers. This creates a reluctance for suppliers to call out bad behaviour or push back on the supermarkets for fear of damaging relationships or losing access to supermarket shelves.
"The Commission is acutely aware of the risk suppliers may face coming forward and has ways to protect their identity and business.
"We have anonymous reporting tools for cartels and GICA and encourage anyone concerned to use these ways of contacting us."
The commission said it would not be providing further comment on the case at this time, as the matter was before the court.
Foodstuffs North Island has been asked for comment.
Andy Matthews, competition and commercial lawyer at Matthews Law, told Morning Report the legal action would be closely watched.
"The big thing about this is it's the first time the commission are bringing a case under GICA, the Grocery Industry Competition Act, for breach of good faith.
"It's fair to say there have been a number of concerns raised about conduct in the grocery sector, so that's why a lot of people will be watching this pretty closely for that side of things."
The commission had been trying to encourage suppliers to sell independently to competing grocers and other channels so they would see it as a significant case, he said.
He estimated it would be a year or two, rather than months, before the legal action worked through the courts.
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