Bayly AndrewANDREW BAYLY (National—Port Waikato): Thank you Madam Speaker. This has been an interesting bill to have an involvement with and we will be supporting this bill tonight. But I'm going to talk about some of the caveats that we have in terms of our support. But we do agree with the general thrust of this bill which is about bringing better outcomes for consumers and more product range at prices that are competitive.It is interesting that this bill has been introduced on the very day that there was a press announcement saying that Countdown's average food prices have risen 9.5 percent this year. The other suppliers of course also have had similar arrangements. That's not all down to the structural arrangements of the industry but certainly it is a huge cost to mums and dads who've got to look after their families and young kids and buying the weekly groceries is a huge cost. So it is important we get this correct and appropriate.I just want to reflect back on the Commerce Commission market study in 2021. The Commerce Commission recognised that there was insufficient competition in the grocery trade and their efforts were towards improving price quality and range of groceries for customers. Three big things came out of that report. The first one was the imbalance as they perceived it in the bargaining power between the major grocery retailers and many of their suppliers and this needed to be addressed. And also related to that there were the Fair Trading Act business-to-business contract term provisions. The second thing was the difficulty of competitors entering the market particularly around getting access to premises and also to supply and the third was ensuring fairness to suppliers.So the result was that there were four crucial recommendations in the report. The first one was to make it easier for competitors to set up and expand. And there are two bits to that. First of all it was to make changes to the land availability provisions. The Commerce Commission suggested making changes to the council planning laws and also banning restrictive lease covenants—glad to see that both the major grocery retailers are making good progress on it.The second one was to improve access to wholesale supply. And I'm going to talk more about this shortly; about some of the conditions of that. The second big recommendation was about improving the relationship between retailers and their suppliers and this involves a mandatory code of conduct and strengthened protections against unfair terms. The third big thing is to help consumers make more informed decisions. Of course that's about display of unit prices when you go to the supermarket and making promotional and pricing practices easier to understand and also that consumers are aware of the terms of loyalty programmes much more explicitly. And the final thing was better regulation requiring the establishment of a dedicated regulator and the establishment of a dispute resolution mechanism.So this bill really picks up on those four big crunchy areas that the Commerce Commission addressed and it does address those issues. The first one is that the committee focused very much on the supplier code of conduct. And it is important that there is proper fair supplier conduct that everyone should be aware of. The big concern—and particularly from National Party members—is that this should be a living document. It shouldn't be just developed in isolation. So we particularly pushed for a change for it to move once it's been initially prepared by the Ministry of Business Innovation and Employment to actually be managed and overseen and updated by the Commerce Commission because the Commerce Commission would be seeing what was happening real practices happening in real time and have the ability to update that code of conduct to reflect current practices and not to see it set in stone and only periodically updated. We thought that was a very important thing and indeed it's been reflected in the legislation.The second thing is that with regard to quicker resolution process we were particularly keen that there was a clear crisp process to make sure that issues could be resolved quickly. The legislation now picks up the compulsory resolution through a dispute mechanism whereby if the dispute is under $5 million it has to be resolved within 28 working days and factors cannot be taken to a higher court other than in respect of matters of law. The whole intent of this is to make sure that if there are disputes between suppliers and the retailers they are dealt quickly with and there's a clear process to do so. And I'm again glad that that was picked up in the legislation.The third thing is around the wholesaling and I just note there's no real independent wholesale chain outside of the duopoly supermarkets. And one of the things we were very keen to make sure of is that where we're allowing in this bill for the retailers to move back into wholesaling it actually captured all the operations not only their own companies but subsidiary companies and companies that they have an interest in or in fact where they control them. We thought it was a very important aspect.However I now want to turn to some of the concerns. The first thing I'm going to say is not covered in the legislation but we believe it's absolutely essential that the regulator is someone from the industry who has very specific skills and knowledge of the industry someone with the appropriate skill set. The terms and the conditions in this bill which shortly will be an Act are unlikely to be realised and it's very important that the Commerce Commission appoints the correct and appropriate person who is going to be forceful and robust in managing and overseeing this grocery trade.The second thing we note is that wholesaling is a big risk and the areas that we're really worried about is that this bill permits—and in fact encourages—supermarkets to move into wholesaling move out of retailing and extend back into the value chain into wholesaling. So the areas of concern: the prices which the grocery retailers are able to source their own brands—known as home brands"—are not now and won't be available to other competitors. What the arrangements provide for is that the supermarkets will have to offer transparently any other price arrangements with other suppliers—and in some cases they are the same suppliers to their home market or home brands—and make those prices available to competitors. The issue of home brands is they're normally a cheaper product and a competitor product to branded products yet the pricing is not available to other competitors who may want to enter the market.The second thing is the potential loss of independent market places in determining what the price of a product is. And for example in the fresh produce market traditionally you had markets like in Mount Wellington where there's an open market and people bid openly for products. Now what's increasingly happening is a lot of the trading of products is on an online basis and no one has visibility around it other than the retailers themselves who have all the knowledge and the suppliers don't see and don't have access to all that information. We want to make sure that a move to tendering to where this retailer has access to all the market information is appropriate and ensures that there is an element of transparency over time.The third thing is that the wholesale supplier logistics are a natural evolution as the major grocery chains move into wholesaling but of course they want to manage the logistics of that. We are cognisant that Foodstuffs North Island made clear that suppliers can supply directly to individual supermarkets but this is not necessarily the case across the whole industry. And whilst we understand there is significant cost in managing and establishing logistics we'd be concerned if retailers propose excessive cost-to-serve fees on suppliers. They need to be reasonable and in some cases there's an issue of whether in fact the supermarket should bear that cost rather than the supplier at all.The fourth one is retailing. With the move to supermarkets increasingly controlling the logistics chain we would also be concerned if there were constraints around the merchandising of those things. Finally there is the issue of the regulatory backstop. The bill assumes that the only answer if these measures fail is more regulation. We don't think that's the case. We think that the bill should provide the Minister with other options to look at regulating the industry and in fact maybe curtailing certain aspects of the grocery trade. We will support the bill but we do have some concerns."