Earlier this year, the largest supermarket operator in the country suggested combining the divisions to establish a national cooperative.
Currently, the boards of Foodstuffs North and South Island divisions manage their operations independently, overseeing popular brands such as New World, Pak’nSave, and Four Square.
On Tuesday, the Commerce Commission turned down the proposal, stating that it would significantly reduce competition in the market.
Chair Dr. John Small explained in a statement that the merger would decrease the number of grocery product buyers in New Zealand from three to two, giving the merged entity more buying power.
“Due to the substantial reduction in competition and the resulting increase in buyer power, the merged entity could potentially negotiate lower prices with suppliers or negatively impact them in the relevant markets,” he said.
Furthermore, there are concerns that the consolidation resulting from the proposed merger could lead to a decrease in supplier investment and innovation, ultimately affecting consumer choice and product quality in the grocery sector.
The rejection of Foodstuffs’ proposal means that other retailers may find it challenging to expand, potentially hindering the growth of a more competitive grocery industry in the future.
Approval from the Commerce Commission and the High Court was required for Foodstuffs’ proposal to proceed.
The Commission can only approve a merger if it is satisfied that it will not significantly reduce competition in the market.
