The Commerce Commission is taking Foodstuffs South Island to court over what it describes as “far-reaching anti-competitive conduct that deprived customers of cheaper prices”, alleging the co-operative stopped independently owned Pak’nSave supermarkets from cutting prices without permission from head office.
The regulator confirmed the proceedings on Thursday morning, RNZ reported. It alleges Foodstuffs South Island wrote and enforced a set of guidelines that limited what its franchisees were allowed to discount, and that the arrangement amounts to resale price maintenance, which is unlawful under the Commerce Act.
Foodstuffs South Island is a grocery co-operative and the owner of the New World, Pak’nSave and Four Square brands in the south. Its supermarkets are not company stores. Each one is run by an owner-operator who buys into the co-op, and that structure sits at the heart of how the grocery trade has long defended itself against complaints about concentration. Individual stores are supposed to set their own prices, run their own promotions, and undercut each other where they see an opening.
“Instead, we allege FSSI applied guidelines and rules that stopped these independently owned and operated supermarkets from offering certain discounts unless they received prior approval,” Commerce Commission chair John Small said.
The commission says the co-operative set a “super deal” promotional price centrally, and that franchisees were not permitted to go below that price unless they got approval first. It also alleges stores were barred from discounting any other product in the same category below the super deal price, which would close off the obvious workaround of dropping the price on a rival brand sitting on the same shelf.
A second set of rules is alleged to have applied to an “every day low price” set by head office, mostly on shelf staples, with stores again unable to discount further without prior approval. Small said the conduct was not isolated. “We will argue the alleged anti-competitive conduct was widespread, with FSSI’s guidelines covering all South Island Pak’nSave franchisees for a period of at least several years,” he said.
Resale price maintenance is one of the older prohibitions in New Zealand competition law and it is narrower than most people assume. The Commerce Commission describes it as what happens when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods. Suggesting a retail price is fine. Publishing a recommended price is fine. What a supplier cannot do is make that price stick, or lean on a retailer that goes lower. The commission’s guidance is explicit that punishing a discounter is exactly the conduct the law is aimed at.
The penalties are not trivial if a case of this kind is proven. Under the Commerce Act a company can be fined the greater of $10 million, three times the commercial gain from the breach, or 10 per cent of turnover, and individuals involved can be fined up to $500,000 for each contravention. None of that follows automatically. These are civil proceedings, the allegations have not been tested, and no court has made any finding against Foodstuffs South Island.
The co-operative is not conceding anything. A Foodstuffs South Island spokesperson said it took its responsibilities seriously, had engaged constructively with the Commerce Commission and would continue to do so. “The allegations relate to specific promotional programmes and do not change Pak’nSave’s focus on helping Kiwis get their groceries at New Zealand’s lowest prices,” the spokesperson said, adding that it would be inappropriate to comment further at this stage.
The business at stake is substantial. In its accounts for the year to February 2024, reported at the time by interest.co.nz, the co-operative lifted net revenue 8 per cent to $3.62 billion while posting a net loss after tax of $11.5 million. Its members ran 193 Pak’nSave, New World, Four Square, On the Spot and Raeward Fresh stores along with six Trents branches.
This is the second serious enforcement action against a Foodstuffs co-operative in about a year. In July 2025 the commission filed civil proceedings against Foodstuffs North Island and its wholesale arm Gilmours, alleging cartel conduct in the form of market allocation, along with breaches of the Grocery Industry Competition Act. That case concerned a supplier and a hospitality customer who had started trading directly, and the commission alleges the pair were pushed back through the wholesaler. Foodstuffs North Island denied unlawful conduct and the matter is not expected to reach trial until 2027.
The regulator has also been working the wholesale end of the business. In July it closed its wholesale supply inquiry after finding the major supermarkets collect roughly $6 billion a year from suppliers in rebates, discounts and other payments spread across more than 50 payment types, money that smaller retailers cannot access on the same terms. “These payments add backroom complexity and reinforce the low levels of competition in the grocery market,” Grocery Commissioner Pierre van Heerden said at the time. Newswire covered that finding in July. The two co-operatives, meanwhile, argued their appeal against the blocked merger of their North and South Island businesses in the High Court at Wellington in March.
What makes the new case different is where it lands. The supplier payments work is about the plumbing behind the shelf, and it is hard for shoppers to see or feel. This one is about the shelf itself, and the number on the ticket. It also goes at the industry’s standard answer to questions about a market where two players hold roughly 82 per cent of grocery spending, which is that the stores themselves are independent and compete hard against one another on price. If a court accepts the commission’s account, that answer becomes considerably harder to make in the South Island, because the discounts an owner-operator was free to offer would turn out to have needed a sign-off from Christchurch first.
There is no timetable yet for a hearing. Cases of this size routinely take two years or more to reach a courtroom, and the commission has not said publicly what penalty it will seek. For now the claim is an allegation, and Foodstuffs South Island has given no indication it intends to settle.
Newswire has since argued that the warehouses and buying power behind Pak’nSave and New World should be taken into public ownership and opened to every grocer at cost, so that competition happens between the shops rather than inside a co-operative.
Have you run or worked in a South Island supermarket, or noticed prices moving in lockstep between stores that are meant to compete? Tell us what you have seen in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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