Clark DavidCOMMERCE (GROCERY SECTOR COVENANTS) AMENDMENT BILLFirst ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): I present a legislative statement on the Commerce (Grocery Sector Covenants) Amendment Bill.DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon Dr DAVID CLARK: I move That the Commerce (Grocery Sector Covenants) Amendment Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House by 16 June 2022 and that the committee have authority to meet at any time while the House is sitting except during oral questions during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House and outside the Wellington area despite Standing Orders 193 195 and 196.The bill amends the Commerce Act 1986 banning restrictive covenants on land and exclusive covenants on leases which stifle competition. It makes existing covenants that meet this test unenforceable. Groceries are an essential purchase as well as a major expense for most New Zealand households. In the year to June 2019 food was the second largest expense for New Zealand households with an average spend of $234 per week. Competition between the major grocery retailers is a key driver of price quality range and service that is offered to Kiwi consumers. In March the Commerce Commission published its final report on the market study into the retail grocery sector. It found that in New Zealand competition is not working as it should be; it is not working in the interests of Kiwi consumers and instead the duopoly made up of Woolworths New Zealand and Foodstuffs is making large profits at the expense of everyday New Zealanders. In fact they found that even on their most conservative estimate that duopoly was taking a million dollars a day in excess profits each and every day of the year out of New Zealanders' pockets. So in its report then the Commerce Commission noted that the best way to improve competition is to make it easier for competitors to enter the market which brings us to tonight's bill. Our major grocery retailers have been lodging and obtaining restrictive covenants on land and exclusive covenants on leases. Because of this our supermarkets have effectively been engaged in land wars which in some cases has left suburbs and shopping centres without choice. An example of this is in Ponsonby in Auckland which is only serviced by Countdown. Members in this House will have their own examples of this around the country. Of course these bans on land are also a disincentive to new competitors coming into the market who might look from offshore and see a highly profitable sector that they want to be a competitor in because they think it's good for business and because they could give a better deal for consumers. So based on the Commerce Commission's findings a new ban will be applied to covenants that benefit Woolworths New Zealand and Foodstuffs. We will build in the option to include other retailers in the future should the Commerce Commission consider it appropriate. If others set up here and start the same practices they too would be subject to a ban. There is one covenant that I believe should be permitted and this is something that can be tested through the select committee process. Businesses that sell retail fuel often add a covenant to the land preventing the future installation of fuel tanks. That guards against the potential for litigation over responsibility if there is a future leak of fuel and that litigation typically goes around who is responsible for contamination in the soil. The proposed bill would therefore not apply to covenants in place for legal and environmental impact reasons connected to a retail fuel site as defined in section 4 of the Fuel Industry Act 2020. The Commerce Act will also allow the commission to approve individual applications for covenants as well should that be deemed in the public interest—i.e. if the public benefit of a covenant in a particular specific circumstance outweighs any negative effects. So that again makes sure we don't end up with unintended consequences. We made a campaign promise at the last election to address the rising cost of groceries and to make sure shoppers are paying a fair price at the checkout. Let's not forget as I've mentioned that even in the most conservative estimate of the Commerce Commission in their recent study the major grocery retailers are earning excess profits of a million dollars a day. Now those are beyond the ordinary profits you'd expect. It's a commercial enterprise; they should be able to invest and receive profits. These are the excess profits—a million dollars a day they are taking each and every day over and above a reasonable profit out of ordinary everyday Kiwis' pockets. This is simply too important an issue not to get right on behalf of consumers. So by introducing this bill under urgency the Government will address the most straightforward part of the reforms quickly. It also signals Government's desire to see new competitors enter the sector. It gives any new competitors that want to arrive in New Zealand and want to then expand the surety that they will not be subject to bans on how they can use prime sites in different districts that up until now may have been blocked for a competitor to use to bring competition to the market. I will be bringing further legislative reforms to Parliament for consideration later this year. I propose that the bill be referred to the Economic Development Science and Innovation Committee with a shortened process of one month. This will enable any unforeseen consequences in the drafting of the amendments to be considered. So this bill as I close takes a first major step forward in salvaging our broken grocery sector. We take a stand to end the anti-competitive land wars brought about by restrictive covenants. And for that reason I commend this bill to the House.DEPUTY SPEAKER: The question is that the motion be agreed to.