The Commerce Commission is taking Foodstuffs North Island and its subsidiary Gilmours Wholesale to court, citing what it labels 'cartel conduct'.
The regulator has alleged that the retailers pressured a supplier into an agreement to redirect supply through them.
Competition lawyer Andy Matthews says it's all allegations at this stage, but New Zealand has very 'broad' cartel laws.
"What it means is - pretty much any agreement with an actual or potential competitor probably has a cartel provision. And it's up to the party who's entered into the alleged cartel provision to demonstrate an exception that the Commerce Act applies."
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Episode Transcript
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Speaker 1 (00:00):
Right now. Foodstuff's North Island you might have heard about
this in the news today and it's subsidiary Gilmore's Wholesale,
are being taken to court for what the Commerce Commissioner
is calling cartel conduct. The ComCom ledges that the two
supermarkets pressured a grocery supplier to sell to them rather
than directly to another business. Foodstuffs North Island is denying
(00:22):
any wrongdoing in its practices. Andy Matthews is a competition
lawyer at Matthew's Law and is with me tonight.
Speaker 2 (00:29):
Hi.
Speaker 1 (00:30):
Andy, right, I'm good to have you on this show.
You very well, Thank you. What do you make of
the case that the Commerce commission Well, what we know
of the case that they're taking.
Speaker 3 (00:41):
Yeah, look, that's a good point.
Speaker 2 (00:42):
We don't have the details and it's just allegations at
this stage until it goes through the court process. But
I guess look backdrop, there's a few things going on.
New Zealand law has some of the broadest sort of
cartel laws in the world. What is defined as a
cartel provision and a contract arrangement or understanding is a
(01:05):
lot broader than you or I might have thought before
this law was passed, and certainly even a lot of
lawyers get a bit confused on this. It's pretty much
any agreement between actual or potential competitors which relates to price, quality, capacity, supply,
all of those things.
Speaker 3 (01:20):
And what it means is pretty much any agreement.
Speaker 2 (01:23):
With an actual potential competitor probably has a cartel provision.
Then it's up to then to the party who's entered
into the alleged cartel provision to demonstrate that an exception
in the Commerce Act applies and that there are ones
for sort of collaborations to joint ventures, you know, joint
buying groups, but also something called vertical supply, and it's
(01:46):
the onners.
Speaker 3 (01:46):
Is on the defendant. But what we don't know here
is whether.
Speaker 2 (01:51):
You know, food stuff and Gilwolls have just gone to
this plat and said, hang on, you supply us, we
supply them, you also supply them, how but we enter
an exclusive supply agreement and we think that's a protected
vertical supply under this exception in the Commerce Act.
Speaker 3 (02:05):
I'm just speculating. I'm not saying it does. I'm not
saying it doesn't.
Speaker 2 (02:09):
But the Commerce Commission is obviously incredibly concerned about independent
supply to that doesn't have to go through the supermarket,
so that say, for example, a new supermarket player can
get direct access and suppliers are free to and free
of a fear.
Speaker 3 (02:29):
Of sanction and those sorts of things.
Speaker 2 (02:30):
And the commission's media release says that the supplier wanted
to supply the hospitality customer directly, but they were quote
persuaded to sell to food stuffs and Gilmore sort of
routed all that way rather than competing with food stuffs
to sell the product to the hospitality customer.
Speaker 1 (02:49):
So, just speaking generally, let's move away from these two
businesses in particular. But if you wanted to defend, like
somebody comes along and says, right, you're being anti competitive
because you're stopping this business from being able to buy
the honey or whatever it is, then can your excuse be, well,
I'm I'm wanting to be the exclusive provider of this
(03:13):
product and that's why we're signing this deal, and you're
not allowed to sign a deal with someone else. Is
there a legitimate excuse, Well, it can be.
Speaker 2 (03:22):
But taking a step back, as you raised a very
good point, you talked about competition. Nowhere in my description
of the cartel prohibition. Did I mention competition? And the
reason is it's sort of as a type of law,
it's deemed to be bad no matter what. It doesn't
even talk about competition. There's nothing in the Cartel provision prohibition.
And this is where it's a bit weird. If a
bunch of doctors say let's reduce our prices and they
(03:44):
will agree that that is a Cartel provision. So then
there's also a general competition test. There's a misuse of
market power if it's anti competitive, and there are contracts
that are anti competitive and be surprising if the Commission
isn't isn't alleging that as part of its statement acclaim.
But the thing about the Cartel provisions, it's a bit
like the Fair Trading Act.
Speaker 3 (04:04):
It's kind of they've got you.
Speaker 2 (04:05):
If they've got you, they don't have to prove anti
competitive harm, just that you've entered this restrictive agreement. But
that's why the exceptions are so important. But I should
have mentioned you raised a good point is there's still
a general competition thing. So if they say no, no, it's okay,
it falls within the vertical supply exception. Well that's going
to be matter for the courts. It's new law.
Speaker 3 (04:23):
The Commission have.
Speaker 2 (04:25):
Quite a narrower perspective on what that exception covers to
some others and what's protected and what's not.
Speaker 3 (04:33):
So the fallback is a competition argument.
Speaker 1 (04:35):
Right, So is it would an exclusive deal be okay
or not?
Speaker 3 (04:40):
Is that even? Well, it can be.
Speaker 2 (04:42):
People do it all the time, but they do need
to be aware of the law and that the law
is really complex and really counterintuitive. Like if I start
by saying yes I did to you, Oh, any agreement
with a competitor has probably got a cartel.
Speaker 3 (04:55):
Provision in it.
Speaker 2 (04:56):
That's not that much of an exaggeration, and that's our
stuf points. So then you need to review it and
you go, does this fit within one of those exceptions?
Do we need to pull it back a bit so
that it falls within the wording of the law and
the sort of the the spirit of the law.
Speaker 1 (05:12):
And it's quite a hard thing to prove.
Speaker 3 (05:15):
Well, it could be. Yeah, this is the first case.
This is the first case testing this sort of stuff that.
Speaker 2 (05:21):
That that I'm aware of, assuming that it's not settled,
because quite often these cartel cases are settled because it
can be it can be hard to to prove prove
that that it's okay. Look, I don't know whether this
is hard or not because I don't like you. I've
got a bit of a bit of a guide from
the Commission in terms of the media release. But it's
(05:42):
it's the Commissioner obviously taking it pretty seriously. They are
wanting to be a braver and boulder litigants as they
been asked to be by the Commission. It's fair to
say that hasn't they haven't. They haven't contested as much
through the courts on pure competition grounds. It's tended to
be these types of cartel cases. Then interesting thing about
this that you haven't asked about is, and having done
(06:04):
a bit of grocery work, I'm a bit of a
geek about this is there's something called literally the Geeker,
which is the Grocery Industry Competition Act, and that includes
a code of conduct and one of the big prohibitions,
or one of the big requirements, is that the regulated
grocery retailers.
Speaker 3 (06:22):
So that's the two food stuff's.
Speaker 2 (06:23):
Companies and we'll always have to act in good faith
in their dealings with suppliers. So for me, that's a
particularly interesting aspect to this because good faith is you know,
it's sort of one of those things we don't know
quite how our court interprets.
Speaker 3 (06:39):
What's good faith and what's not good faith.
Speaker 2 (06:41):
And I think the Commission have bided their time to
pick the case that they think is the right one.
And I don't think they will have issued you know,
we'll havn't issued the proceedings yet, but that said, they're
going to. I don't think they'll have done this lightly,
but I do wonder whether food Stuffs might say well
on vertical supply agreement.
Speaker 1 (06:59):
It's okay, right, Andy, I'll keep an eye on that
geeker the geeker and when the case goes through court,
appreciate your time. This evening, Andy Matthews Competition Law with
us explaining that case. It's been taken by the Commerce
Commission against Foodstuffs North Island and its subsidiary Gilmore's Allsale.
Speaker 3 (07:16):
For more from Heather Duplessy Allen Drive. Listen live to
news talks.
Speaker 1 (07:20):
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio.
Right now. Foodstuff's North Island you might have heard about
this in the news today and it's subsidiary Gilmore's Wholesale,
are being taken to court for what the Commerce Commissioner
is calling cartel conduct. The ComCom ledges that the two
supermarkets pressured a grocery supplier to sell to them rather
than directly to another business. Foodstuffs North Island is denying
(00:22):
any wrongdoing in its practices. Andy Matthews is a competition
lawyer at Matthew's Law and is with me tonight.
Speaker 2 (00:29):
Hi.
Speaker 1 (00:30):
Andy, right, I'm good to have you on this show.
You very well, Thank you. What do you make of
the case that the Commerce commission Well, what we know
of the case that they're taking.
Speaker 3 (00:41):
Yeah, look, that's a good point.
Speaker 2 (00:42):
We don't have the details and it's just allegations at
this stage until it goes through the court process. But
I guess look backdrop, there's a few things going on.
New Zealand law has some of the broadest sort of
cartel laws in the world. What is defined as a
cartel provision and a contract arrangement or understanding is a
(01:05):
lot broader than you or I might have thought before
this law was passed, and certainly even a lot of
lawyers get a bit confused on this. It's pretty much
any agreement between actual or potential competitors which relates to price, quality, capacity, supply,
all of those things.
Speaker 3 (01:20):
And what it means is pretty much any agreement.
Speaker 2 (01:23):
With an actual potential competitor probably has a cartel provision.
Then it's up to then to the party who's entered
into the alleged cartel provision to demonstrate that an exception
in the Commerce Act applies and that there are ones
for sort of collaborations to joint ventures, you know, joint
buying groups, but also something called vertical supply, and it's
(01:46):
the onners.
Speaker 3 (01:46):
Is on the defendant. But what we don't know here
is whether.
Speaker 2 (01:51):
You know, food stuff and Gilwolls have just gone to
this plat and said, hang on, you supply us, we
supply them, you also supply them, how but we enter
an exclusive supply agreement and we think that's a protected
vertical supply under this exception in the Commerce Act.
Speaker 3 (02:05):
I'm just speculating. I'm not saying it does. I'm not
saying it doesn't.
Speaker 2 (02:09):
But the Commerce Commission is obviously incredibly concerned about independent
supply to that doesn't have to go through the supermarket,
so that say, for example, a new supermarket player can
get direct access and suppliers are free to and free
of a fear.
Speaker 3 (02:29):
Of sanction and those sorts of things.
Speaker 2 (02:30):
And the commission's media release says that the supplier wanted
to supply the hospitality customer directly, but they were quote
persuaded to sell to food stuffs and Gilmore sort of
routed all that way rather than competing with food stuffs
to sell the product to the hospitality customer.
Speaker 1 (02:49):
So, just speaking generally, let's move away from these two
businesses in particular. But if you wanted to defend, like
somebody comes along and says, right, you're being anti competitive
because you're stopping this business from being able to buy
the honey or whatever it is, then can your excuse be, well,
I'm I'm wanting to be the exclusive provider of this
(03:13):
product and that's why we're signing this deal, and you're
not allowed to sign a deal with someone else. Is
there a legitimate excuse, Well, it can be.
Speaker 2 (03:22):
But taking a step back, as you raised a very
good point, you talked about competition. Nowhere in my description
of the cartel prohibition. Did I mention competition? And the
reason is it's sort of as a type of law,
it's deemed to be bad no matter what. It doesn't
even talk about competition. There's nothing in the Cartel provision prohibition.
And this is where it's a bit weird. If a
bunch of doctors say let's reduce our prices and they
(03:44):
will agree that that is a Cartel provision. So then
there's also a general competition test. There's a misuse of
market power if it's anti competitive, and there are contracts
that are anti competitive and be surprising if the Commission
isn't isn't alleging that as part of its statement acclaim.
But the thing about the Cartel provisions, it's a bit
like the Fair Trading Act.
Speaker 3 (04:04):
It's kind of they've got you.
Speaker 2 (04:05):
If they've got you, they don't have to prove anti
competitive harm, just that you've entered this restrictive agreement. But
that's why the exceptions are so important. But I should
have mentioned you raised a good point is there's still
a general competition thing. So if they say no, no, it's okay,
it falls within the vertical supply exception. Well that's going
to be matter for the courts. It's new law.
Speaker 3 (04:23):
The Commission have.
Speaker 2 (04:25):
Quite a narrower perspective on what that exception covers to
some others and what's protected and what's not.
Speaker 3 (04:33):
So the fallback is a competition argument.
Speaker 1 (04:35):
Right, So is it would an exclusive deal be okay
or not?
Speaker 3 (04:40):
Is that even? Well, it can be.
Speaker 2 (04:42):
People do it all the time, but they do need
to be aware of the law and that the law
is really complex and really counterintuitive. Like if I start
by saying yes I did to you, Oh, any agreement
with a competitor has probably got a cartel.
Speaker 3 (04:55):
Provision in it.
Speaker 2 (04:56):
That's not that much of an exaggeration, and that's our
stuf points. So then you need to review it and
you go, does this fit within one of those exceptions?
Do we need to pull it back a bit so
that it falls within the wording of the law and
the sort of the the spirit of the law.
Speaker 1 (05:12):
And it's quite a hard thing to prove.
Speaker 3 (05:15):
Well, it could be. Yeah, this is the first case.
This is the first case testing this sort of stuff that.
Speaker 2 (05:21):
That that I'm aware of, assuming that it's not settled,
because quite often these cartel cases are settled because it
can be it can be hard to to prove prove
that that it's okay. Look, I don't know whether this
is hard or not because I don't like you. I've
got a bit of a bit of a guide from
the Commission in terms of the media release. But it's
(05:42):
it's the Commissioner obviously taking it pretty seriously. They are
wanting to be a braver and boulder litigants as they
been asked to be by the Commission. It's fair to
say that hasn't they haven't. They haven't contested as much
through the courts on pure competition grounds. It's tended to
be these types of cartel cases. Then interesting thing about
this that you haven't asked about is, and having done
(06:04):
a bit of grocery work, I'm a bit of a
geek about this is there's something called literally the Geeker,
which is the Grocery Industry Competition Act, and that includes
a code of conduct and one of the big prohibitions,
or one of the big requirements, is that the regulated
grocery retailers.
Speaker 3 (06:22):
So that's the two food stuff's.
Speaker 2 (06:23):
Companies and we'll always have to act in good faith
in their dealings with suppliers. So for me, that's a
particularly interesting aspect to this because good faith is you know,
it's sort of one of those things we don't know
quite how our court interprets.
Speaker 3 (06:39):
What's good faith and what's not good faith.
Speaker 2 (06:41):
And I think the Commission have bided their time to
pick the case that they think is the right one.
And I don't think they will have issued you know,
we'll havn't issued the proceedings yet, but that said, they're
going to. I don't think they'll have done this lightly,
but I do wonder whether food Stuffs might say well
on vertical supply agreement.
Speaker 1 (06:59):
It's okay, right, Andy, I'll keep an eye on that
geeker the geeker and when the case goes through court,
appreciate your time. This evening, Andy Matthews Competition Law with
us explaining that case. It's been taken by the Commerce
Commission against Foodstuffs North Island and its subsidiary Gilmore's Allsale.
Speaker 3 (07:16):
For more from Heather Duplessy Allen Drive. Listen live to
news talks.
Speaker 1 (07:20):
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio.
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