Progressive boss warns NZ politicians about misusing Parliamentary privilege after supermarket inquiry ends

Thursday 20th November 2014

Progressive Enterprises managing director Dave Chambers said New Zealand politicians need to be careful about allegations made under Parliamentary privilege which could prove damaging to businesses.

His comment follows the Commerce Commission concluding it would take no action following an inquiry into complaints by former Labour Party MP Shane Jones and the NZ Food & Grocery Council, which represents manufacturers and suppliers, that the Progressive-owned Countdown was bullying suppliers. The Food & Grocery Council said it wasn’t surprised by the outcome given New Zealand’s current legal framework and that didn’t mean business behaviour New Zealanders would deem unfair had not occurred.

The competition watchdog’s report out today said it didn’t consider Progressive had engaged in deceptive or misleading behaviour despite almost 90 complaints from suppliers that led to investigations into potential breaches of the Fair Trading and Commerce Acts.

The commission suggests much of the concern among suppliers to supermarkets occurred earlier this year when Progressive changed its strategy to try to resist price increases from suppliers by locking in existing prices where it could and making greater use of its sales and margin data to assess supplier performance.

It did warn however that supermarkets should communicate better with suppliers to avoid misunderstanding and that discussions about competitor suppliers “carry significant risks for all involved”.

The Food & Grocery Council said it was standing by its statements, based on information received from members earlier this year, that Countdown did ask some suppliers for payments related to trading in previous periods.

But the commission’s inquiry report detailed the outcome of complaints relating to retrospective payments involving two large multinational suppliers. It said the suppliers were confused in their earlier conversations with Progressive over whether it was asking for a lump sum payment or other compensation because sales of their products had been lower than required, or if it was the amount of margin improvement required in future.

“However, the initial confusion was resolved with subsequent communications, and neither supplier felt coerced by improper threats of commercial sanction to concede to Progressive’s request,” the report said. In both cases the suppliers have since negotiated deals with the supermarket chain without retrospective payments being made.

Chambers said he was pleased the inquiry was finally over but the company had taken a financial hit over the allegations and lost market share, most of which it had since regained through a price lockdown campaign. The company’s financial results for the 52 weeks ending June 29 showed a 4.2 percent lift in pretax earnings to $308.9 million.

Jones's allegations came before his unexpected resignation as an MP to become a roving fisheries ambassador in a move seen as a coup for the National Party-led government, given his strong political performance. Jones alleged Countdown's tactics amounted to "corruption, racketeering and blackmail" and likened its behaviour to the TV crime series family, the Sopranos, allegations that Countdown denied at the time.

Chambers said any action against Jones over the “outrageous” allegations would be extremely difficult because they were made in Parliament.

The chief executive said an internal review by the supermarket operator of the way its staff were dealing with its 4,000 suppliers had also found no evidence of anyone acting outside the rules. He said the company had no intention of backing off its new strategy, which was benefiting consumers.

“Our job is to be the customers’ champion. We will always have talks with suppliers’ about price.”

The Food & Grocery Council said robust negotiations which deliver good grocery savings for Kiwi and fair treatment of suppliers were not mutually exclusive. It’s calling for a legislated grocery code of conduct or to consider laws that deal with unconscionable dealings. Labour’s Commerce spokesman Clayton also wants to see a mandatory code of conduct, as is the case in the UK, given New Zealand has two dominant grocery players with 95 percent market share.

The Australian Competition and Consumer Commission is pushing ahead with its twin investigations into the power of the supermarket chains over allegations of bullying suppliers and the misuse of petrol shopper dockets. That’s despite the two main operators, Coles, and Progressive’s parent, Woolworths, agreeing to a draft voluntary code of conduct that sets out how both sides should behave.

Chambers said he was open to the idea of a similar code in New Zealand providing it was balanced to the needs of both suppliers and retailers.

BusinessDesk.co.nz

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