Consumer NZ says regulatory intervention is needed to ease pressure on New Zealanders' pockets and enable fair practice among major supermarkets.

It comes as the Commerce Commission releases a draft report, which found the duopoly of Foodstuffs and Countdown was working against consumers, food producers, and stifling the chances of further bigger players coming into the market.

Consumer NZ head of research Jessica Wilson told Nine to Noon they were pleased to see the commission's recommendations, especially requiring major chains to operate with fair terms and conditions and to allow other retailers access to wholesale prices.

"A mandatory code of conduct could also have a lot of traction, if that code of conduct also sets fair conduct obligations on major chains and allowed the Commerce Commission to intervene and prosecute where the chains were not complying."

Laws already exist within the Fair Trading Act around unfair terms in consumer contracts, however, Wilson said they would like to see similar requirements in grocery supply contracts.

"So requirements for those contracts to be fair and not have any terms in them that significantly advantage the supermarket over the supplier.

"So if that was a condition either in a mandatory code of conduct or as an amendment to the Fair Trading Act, it would have a lot more heft, and if the commission had the power to prosecute when the major chains were not playing ball, it would create a significant incentive on the stores to change their practices."

The report also found that the two big players were not competing on prices, and there were barriers to the entrance of a third player - which would be key in creating competition.

Wilson said the major players have had "a very cosy position" for about two decades, or since the merger of the stores that are now part of Countdown.

"It has been a situation where they pretty much now ... price match rather than compete.

"If those fair conduct obligations are put on stores, we think that would make it easier [for a third party to enter and promote competition], because the stores wouldn't be able to get away with the kind of standover tactics that they can at the moment."

The Commerce Commission also discusses a regulated access regime to let smaller players access to wholesale prices.

"Regulatory intervention is needed," Wilson said. "We just can't carry on the way we are.

"We've got a highly concentrated market and supermarket prices are a key concern for consumers, we are paying more than we should be."

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Photo: RNZ/Vinay Ranchhod

AUT senior lecturer of marketing Sommer Kapitan agreed, saying New Zealand's grocery prices were among the highest in the OECD.

"The Commerce Commission found in eight months what any consumer could have articulated freely: grocery prices are too high," Dr Kapitan said.

New Zealanders were having to make choices about healthier food based on price, she said.

"High prices are a barrier to better health for most Kiwis. The government must act now to correct this imbalance and make good quality, healthy unprocessed wholefoods a more affordable price for all New Zealanders."

It echoes Te Paati Maori co-leader Debbie Ngarewa-Packer's comments about making healthy food affordable, in light of the release of the report.

Creating competition?

Among the options raised by the commission if the other proposals did not work, was to directly stimulate competition by creating another major grocery retailer.

Wilson said that option would be a more costly form of intervention, with possibility of creating it by requiring divestment of existing assets from some of the major chains.

"That may be a way to do it but again, the way it's being phrased in the recommendations [it] seems to be one of the last resort options."

University of Auckland senior marketing lecturer Bodo Lang said having another major grocery retailer would help reduce the pressures of excessive grocery prices, particularly for those on lower incomes.

However, Dr Lang said the duopoly of Foodstuffs and Woolworths NZ was only part of the problem.

New Zealanders were also paying export prices for primary products, such as dairy, beef or lamb grown in New Zealand.

New Zealand's small market size and distance from where many foods are produced also contributed to high prices.

"While New Zealanders are unlikely to ever enjoy highly competitive prices, implementing some of the recommendations will go some way to reduce the burden of high grocery prices faced by all New Zealanders," Dr Land said.