The Commerce Commission is taking Foodstuffs South Island to court, alleging the co-operative stopped independently owned PAK’nSAVE supermarkets from discounting products and left shoppers paying more than they needed to.

The Commission will file civil proceedings alleging Foodstuffs South Island implemented and enforced a widespread restriction on discounting across its South Island PAK’nSAVE franchisees.

“The conduct we allege occurred deprives Kiwis of the best possible prices when shopping at their local supermarket and limits competition,” Commerce Commission chair Dr John Small said.

“Under the franchise model, individual South Island PAK’nSAVE supermarkets are supposed to be able to compete on pricing, discounts and promotions. Instead, we allege FSSI applied guidelines and rules that stopped these independently owned and operated supermarkets from offering certain discounts unless they received prior approval.”

The Commission alleges three forms of discounting were blocked.

Foodstuffs South Island centrally set a “Super Deal” promotional price and prohibited franchisees from going below it without prior approval. Stores were also barred from discounting any other product in the same category below that Super Deal price. Separately, the co-operative set an “Every Day Low Price” centrally, mainly on shelf staples, and prevented stores from discounting those goods further unless approval was given.

The Commission will argue the conduct amounts to resale price maintenance, which is illegal under section 37 of the Commerce Act. Resale price maintenance occurs when a supplier enforces a minimum price at which a reseller must sell its goods, and it is illegal regardless of its effect on competition.

Small said the alleged conduct was not isolated.

“We will argue the alleged anti-competitive conduct was widespread, with FSSI’s guidelines covering all South Island PAK’nSAVE franchisees for a period of at least several years.”

The Commission said it continued to detect anti-competitive behaviour by the country’s major supermarkets, and that it could not comment further because proceedings were about to be filed.