Countdown supermarket scandal

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#997768 2-Mar-2014 20:49

It would remove their ability to use market power to extract economic rents from customers.

It would remove their ability to use market power to extract economic rents from suppliers.

Just because they compete hard, doesn't mean they aren't extracting monopoly rents. You might want do do some reading up on how duopolies are bad for consumers and the wider economy.

turnin

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#997771 2-Mar-2014 20:52

Companies have one goal, the bottom line, big companies especially have decision makers that are more isolated from the people those decisions effect. That the real issue, we've all seen or heard what happens when the warehouse or another big retailer moves in to a small town, worse when the profits move offshore, these are the real issues and whilst these supermarkets should be held accountable for poor ethics, if thats what it turns out to be remember that they are competing with everyone else doing the same thing. This does NOT make it right.
If people want to boycott this type of 'behaviour' they would be better to support local farmers markets, which for fresh produce would no doubt deliver better food. However the convenience of a supermarket is going to be hard to emulate, perhaps with modern tech we can know who has what in stock and even share the contents of their own vege gardens but in reality I doubt many will boycott one company over another, even if these allegations are found to be true.

bfginger

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#1009447 19-Mar-2014 23:04

There is intense competition between the two companies that control 95% of the retail market but that doesn't mean a duopoly is a healthy market because the balance of power has strongly shifted in favour of the supermarkets and their brands over the food producers and their brands.

If you own a food company and one side drops you, you're losing either half of nearly 100% of your domestic market. If you lose half of your sales you'll probably go broke, if you lose nearly all of your sales you will go broke. When you're dependent on one company's whims for your business they can tell you what to do such as lower the unit price to a point where you must shrink the product or lower the quality of ingredients.

Only a few of the strongest brands have the kind of leverage over supermarkets that would more normally happen in a more pluralistic market. Without choices, branding in the food market becomes all about the supermarkets' brands and not the food companies' brands. The kind of television advertising that often happened for food items 20 or more years ago is much rarer now. Supermarkets, particularly Countdown, would view food branding as threatening as it gives the food companies more leverage over the supermarkets. You'll miss Marmite, but you won't miss the old anonymous supplier of a Home Brand Yeast Spread.

Countdown tries hard to move people over to Home Brands. With Home Brands the power is much more in the supermarket's hands than the manufacturers' and they're freer to quietly switch to imported material. Since Woolworths took over Progressives their supermarkets have slowly but steadily changed with Home brands, Australian food and Chinese imports steadily increasing in prominence at the expense of New Zealand brands.

Ragnor

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#1012009 24-Mar-2014 18:47

I doubt the NZ market can sustain a 3rd big player remember The Warehouse tried and gave up.

old3eyes

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#1012021 24-Mar-2014 19:05

Ragnor: I doubt the NZ market can sustain a 3rd big player remember The Warehouse tried and gave up.

I think we used to have 5 not so long ago..

Regards,

Old3eyes

mattwnz

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#1012024 24-Mar-2014 19:12

Ragnor: I doubt the NZ market can sustain a 3rd big player remember The Warehouse tried and gave up.

I think they can. You could say the same about mobile providers, the commerce commission helped them, to break the duopoly, and now are prices are a lot better.

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#1012031 24-Mar-2014 19:26

Ragnor: I doubt the NZ market can sustain a 3rd big player remember The Warehouse tried and gave up.

The Warehouse gave up because they couldn't compete on price. You only need to look at their grocery pricing now which is significantly more than a supermarket to realise why.

SepticSceptic

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#1013145 26-Mar-2014 13:28

bfginger:

Countdown tries hard to move people over to Home Brands. With Home Brands the power is much more in the supermarket's hands than the manufacturers' and they're freer to quietly switch to imported material. Since Woolworths took over Progressives their supermarkets have slowly but steadily changed with Home brands, Australian food and Chinese imports steadily increasing in prominence at the expense of New Zealand brands.

Have noticed in Countdown that there is no aerosol based product that is made in NZ - Fly sprays, air freshners, etc. All imported from Oz, or elsewhere.
PaknSave and NewWorld still have aerosol-based products made in NZ.

Weird example, but I did some work a few years ago at an aerosol filling plant weigh-station in Sydney. Interesting how they make a non-explosive environment, and the hurdles to overcome. No belt buckles, only certain metal tools, etc.
Interest by association :-)

gzt

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#1013196 26-Mar-2014 14:32

The Warehouse attempt was truly bizarre. I'm sure the competitors could not believe their luck.

freitasm

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#1179998 20-Nov-2014 10:50

Just received:

The Commerce Commission has completed its investigation into allegations of anti-competitive and intimidating behaviour by Progressive Enterprises Ltd, the operator of Countdown supermarket chain, towards their suppliers.

Based on the evidence gathered during the investigation, the Commission does not believe that Progressive has breached any of the laws it enforces and it will not be taking any action against Progressive.

Chief Executive Brent Alderton said the allegations made against Progressive, first aired in February this year, were serious and the Commission had undertaken an extensive and thorough investigation into those allegations.

“The supermarket industry is important in New Zealand, it has an impact on all New Zealanders and it is vital that it operates in a competitive way. Our role in this investigation was to assess whether Progressive’s dealings with its suppliers breached any of the laws we enforce. We do not consider that any of the conduct we investigated was unlawful and our investigation is now closed. We do not intend to take any further action.”

Mr Alderton said in total the Commission received almost 90 complaints. The investigation focused on a number of areas, including whether Progressive had engaged in any conduct that was misleading or deceptive or otherwise breached the Fair Trading Act. In addition, the investigation considered whether there was any evidence to suggest that any of Progressive’s behaviour might breach the Commerce Act.

“During the course of the investigation we obtained evidence from both Progressive and its suppliers. We don’t consider that the evidence shows that Progressive engaged in misleading or deceptive behaviour or coerced its suppliers in breach of the Fair Trading Act. Nor do we believe the evidence shows Progressive engaged in anti-competitive behaviour in breach of the Commerce Act,” Mr Alderton said.

“However, the investigation did highlight two areas where commercial parties should be reminded to take care. The first is that ambiguity in business communications should be avoided as it can lead to misunderstanding that can place you at risk of breaching the law. The second is that exchanging information about competitors’ future behaviour, or discussing supplier interactions with a competitor carries significant risks for all involved. Individuals who do so are exposing both themselves personally and their company to a potential breach of the law.”

A copy of the investigation closure report can be found at http://www.comcom.govt.nz/business-competition/competition-enforcement-responses/investigation-reports/