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Hello,
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We’ve reached the last month of winter… and what we would hope is our last COVID-19 lockdown. We’re back to working remotely—please don’t hesitate to make contact by phone or email, as we’re all here and available.
COVID-19 support for businesses
Lockdowns present a challenge for all businesses, whether or not they’re able to work remotely. Make sure you’re familiar with the support available to you.
Commerce Commission investigates grocery prices
One industry for which lockdowns don’t make such a difference is the supermarket industry. And lately, it’s come under some scrutiny by the Commerce Commission.
You might be aware that we have only two main supermarket companies: Woolworths (trading as Countdown, Fresh Choice and SuperValue) and Foodstuffs (New World, PAK’nSAVE, Four Square, Raeward Fresh). They account for about 90% of household grocery sales in New Zealand.
In a market-specific competition study into the industry, the Commerce Commission has concluded that this duopoly (with a few specialist competitors on the fringes) isn’t providing the kind of competition New Zealand consumers need.
The Commission observed that New Zealanders face the sixth-highest grocery bills in the OECD. Suppliers aren’t getting a fair go of it, either, with only two places to shop their wares—who therefore have much more power to set the terms of arrangements.
So why don’t competitors come along? It’s exceedingly difficult. A previous attempt by The Warehouse Group in 2006 to develop a “Warehouse Extra” chain of supermarkets was blocked by Woolworths and Foodstuffs, who each acquired a 10% stake in listed Warehouse shares, and applying for clearance to move to a full takeover.
Although this was refused, the subsequent court action combined with the influence of the shareholdings meant The Warehouse Group discontinued its supermarket ambitions after two years.
So what next? The Commerce Commission has suggested a range of options to improve competition. They include:
Just what is "essential"?
There’s no doubt that supermarkets remain an essential business during a Level 4 lockdown. But what else counts? And what can they deem “essential items” for online delivery? Some ambiguity has led to confusion from businesses over the past week.
Each of us might have differing ideas as to what counts as an “essential item”. But according to the Ministry of Business, Innovation and Employment, broadly it includes items that are necessary for people to:
This wasn’t altogether clear going into lockdown, with Retail New Zealand chief executive Greg Harford telling RNZ’s Morning Report that things caught some retailers “slightly off-guard”. But he added that the clarity would now help businesses do the right thing.
And if you’re unsure about what you can reasonably buy right now? MBIE’s fuller list of items might make it clearer:
What’s happening with the housing market this month?
On our end, we’ve seen a slight slowing in property transactions, but that might just reflect a regular seasonal trend.
Wider market figures show July saw an uptick from the month before. The Real Estate Institute reported a 30.6% increase in sale prices in the year ended July compared with 29.8% in the twelve months through to June.
So for now at least, things certainly don’t seem to be getting any easier for first home buyers. But there are people trying to help the situation. Earlier this month SBS Bank announced a first home buyers’ package, consisting of a 1-year fixed loan rate of 1.99%, and a variety of other cash boosts and incentives.
These kind of moves may well be needed if Reserve Bank proposals introducing tighter loan-to-value restrictions in October are implemented. The Bank wants to allow only 10 per cent of new owner-occupier housing loans to be borrowers with 20 per cent deposits or less, rather than the current 20 per cent of lending.
Still, lower prices may be on the horizon, if we’re to believe investment firm Jarden’s equity research director, Grant Swanepoel. He forecasts a 6% fall in prices in 2022, and a further 3% in 2023. It’s certainly a situation to watch.
Well that’s our legalchat for August. We hope the next one comes to you out of lockdown! As always, we’re just an email or phone call away for any questions, help or advice. We look forward to chatting next time.
COVID-19 support for businesses
Lockdowns present a challenge for all businesses, whether or not they’re able to work remotely. Make sure you’re familiar with the support available to you.
- The COVID-19 Wage Subsidy is available to help New Zealand businesses affected by the move to Alert Level 4 pay their employees (including sole traders).
- The COVID-19 Resurgence Support Payment supports businesses that have experienced at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period.
- The COVID-19 Leave Support Scheme helps pay employees who need to self-isolate and are unable to work from home.
Please let us know if you need any advice or help understanding or applying for any of the support schemes.
Commerce Commission investigates grocery prices
One industry for which lockdowns don’t make such a difference is the supermarket industry. And lately, it’s come under some scrutiny by the Commerce Commission.
You might be aware that we have only two main supermarket companies: Woolworths (trading as Countdown, Fresh Choice and SuperValue) and Foodstuffs (New World, PAK’nSAVE, Four Square, Raeward Fresh). They account for about 90% of household grocery sales in New Zealand.
In a market-specific competition study into the industry, the Commerce Commission has concluded that this duopoly (with a few specialist competitors on the fringes) isn’t providing the kind of competition New Zealand consumers need.
The Commission observed that New Zealanders face the sixth-highest grocery bills in the OECD. Suppliers aren’t getting a fair go of it, either, with only two places to shop their wares—who therefore have much more power to set the terms of arrangements.
So why don’t competitors come along? It’s exceedingly difficult. A previous attempt by The Warehouse Group in 2006 to develop a “Warehouse Extra” chain of supermarkets was blocked by Woolworths and Foodstuffs, who each acquired a 10% stake in listed Warehouse shares, and applying for clearance to move to a full takeover.
Although this was refused, the subsequent court action combined with the influence of the shareholdings meant The Warehouse Group discontinued its supermarket ambitions after two years.
So what next? The Commerce Commission has suggested a range of options to improve competition. They include:
- forced divestment or break-up of the duopoly players
- access for rival retailers to wholesale-level groceries
- more large sites to be made available for rival retainers
- a mandatory code of conduct for fair treatment of suppliers to address the power imbalance
- improved information for consumers.
Just what is "essential"?
There’s no doubt that supermarkets remain an essential business during a Level 4 lockdown. But what else counts? And what can they deem “essential items” for online delivery? Some ambiguity has led to confusion from businesses over the past week.
Each of us might have differing ideas as to what counts as an “essential item”. But according to the Ministry of Business, Innovation and Employment, broadly it includes items that are necessary for people to:
- remain healthy and safe
- work or study from home
- stay in communication with whānau and friends and remain up to date with news and health information.
This wasn’t altogether clear going into lockdown, with Retail New Zealand chief executive Greg Harford telling RNZ’s Morning Report that things caught some retailers “slightly off-guard”. But he added that the clarity would now help businesses do the right thing.
And if you’re unsure about what you can reasonably buy right now? MBIE’s fuller list of items might make it clearer:
- necessary clothing, footwear and bedding
- urgently required white ware and appliances: such as fridges, heaters, washing machines and dryers, vacuum cleaners, fans and dehumidifiers
- urgently required cooking, cleaning and laundry equipment
- medicinal and hygiene products: such as medication, PPE, first aid products, soaps, shampoos, moisturisers and hand sanitisers
- urgently required items for transport maintenance: such as bike and automotive parts and repair kits
- materials for urgent home repair
- urgently required communication devices: such as mobile phones, computer equipment, modems and internet equipment, televisions and radios
- urgently required educational materials and books
- urgently required home office equipment.
What’s happening with the housing market this month?
On our end, we’ve seen a slight slowing in property transactions, but that might just reflect a regular seasonal trend.
Wider market figures show July saw an uptick from the month before. The Real Estate Institute reported a 30.6% increase in sale prices in the year ended July compared with 29.8% in the twelve months through to June.
So for now at least, things certainly don’t seem to be getting any easier for first home buyers. But there are people trying to help the situation. Earlier this month SBS Bank announced a first home buyers’ package, consisting of a 1-year fixed loan rate of 1.99%, and a variety of other cash boosts and incentives.
These kind of moves may well be needed if Reserve Bank proposals introducing tighter loan-to-value restrictions in October are implemented. The Bank wants to allow only 10 per cent of new owner-occupier housing loans to be borrowers with 20 per cent deposits or less, rather than the current 20 per cent of lending.
Still, lower prices may be on the horizon, if we’re to believe investment firm Jarden’s equity research director, Grant Swanepoel. He forecasts a 6% fall in prices in 2022, and a further 3% in 2023. It’s certainly a situation to watch.
Well that’s our legalchat for August. We hope the next one comes to you out of lockdown! As always, we’re just an email or phone call away for any questions, help or advice. We look forward to chatting next time.
Regards,
Clive, Grant and the Team at Canterbury Legal
