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It's on: Commerce Commission launches Countdown investigation

"The Commission can confirm that it is now holding an investigation into the allegations made against Countdown supermarkets," spokesman Gordon Irving told NBR this afternoon.

The regulator had been assessing whether to formally investigate complaint laid by Labour front-bencher Shane Jones last week; it has now decided to push forward.

The investigation will involve seeking a wide range of information from a variety of sources, including organisations from all areas of the supermarket sector. It is expected to take a number of months.

The Commission's announcement follows Mr Jones making new allegations under Parliamentary privilege yesterday against the Countdown and Ralph Waters, chairman of Woolworths (the Australian company that owns Countdown's parent, Progressive Enterprises).

In a statement sent to NBR, Mr Waters said, "I completely reject Mr Jones' allegations and find his insinuations highly offensive. My contribution to business in New Zealand speaks for itself. For the last 13 years I have worked at a senior level with companies such as Fletcher Building, Fisher and Paykel Appliances, Fonterra and Westpac New Zealand. I am extremely disappointed in Mr Jones' behaviour. Attacking an individual and business through the Parliament is no way for any politician to deal with an issue of concern or engage with the business sector."

The Commission did not immediately respond to NBR's query about how it would tackle claims against Woolworths in regards to alleged pressure it applied to Countdown's NZ suppliers, including whether it would liaise with its transtasman counterpart, the ACCC.

A Countdown spokeswoman told NBR, "We believe it’s important to let this process take its course, and we will fully cooperate with any enquiries.”

Mr Jones has alleged the supermarket chain has demanded suppliers pay extra, restropective stocking fees, and threatened to blacklist those who talk.

In Parliament, he alleged Mr Waters had "leaned on" Kiwi suppliers.

He also read out part of an email which said Countdown demanded tens of thousands from a supplier by 5pm that day as payment for insufficient sales the previous month on their product lines.

He planned to forward the email to the Commerce Commission if it promised to protect the anomynity of the supplier (the regulator has already said it will keep supplier's identity confidential, and encouraged suppliers to get in contact*).

One supplier had to pay 7% of their turnover to "get anywhere near" Countdown in New Zealand, but when he approached suppliers in New Zealand they hadn't heard of the policy, Mr Jones said.

Another company with 30 employees and a $4.5 million turnover was forced to close and the owners are now living in Australia after "standing up to Countdown's tactics" the Labour MP alleged.

Mr Jones has gained tacit backing from ex-National MP turned Food and Grocery Council CEO Katherine Rich, who last week said, "We're aware of a number of incidents where our member companies have been asked for retrospective payments. We have raised our general concerns about this practice with the supermarket chain involved. This is a serious issue that is new to the New Zealand grocery sector and we view it as an unwelcome development."

He's also backed by NBR readers - or at least to the degree that a poll of paid online subscribers found 75% believed the Labour MP over Countdown.


* This afternoon, the regulator clarified its position on anonymity In a statement it said, "Anyone who has information relevant to the allegations is encouraged to contact us on 0800 943 600. They can request that the Commission keep their identity and/or the information provided confidential. The Commission will not disclose the identity and/or information unless consent is given or the Commission is required to by law. If confidentiality is a concern then it should be raised when first contact is made with the Commission."

Comments and questions
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Aldi should get into the NZ market as soon as possible - use the Warehouse's existing footprint and shoehorn in some compact supermarkets.

The Foodstuffs boys shouldn't get too cocky with all this attention on Progressive. The cosy duopoly in New Zealand might be coming to an end.

Correct - The only way this duopoly will be squashed is by someone like Aldi entering the market

The weak willed politically appointed Commerce Commission will dally around and probably come up with another panzy response like the Court of Appeal on the Dotcom case
"the defects were defects in form not in substance,"

The chair of the Commission hardly looks like a warrior fighting the cause for the better good - more like a judge at a flower show

Well, since writing this comment I went and looked at the Warehouse's list of substantial shareholders. Progressive and Foodstuffs respectively hold 10% (i.e. total 20%). So fat chance of any viable third competitor leveraging off that floorspace.
The two supermarkets have been buying up supermarket sites for years and not doing anything with them. Wellington examples include: Brethren Church in Chartwell, Tip Top Factory in Newtown, old Mr Chan's site opposite Chaffers New World. I am sure there are many more all over the country. It looks like the anti-competitive behaviour of this duopoly is wide-reaching.

A very simple question to Ralph Waters:

"Can you guarantee that:
(a) none of your managers or staff have demanded suppliers pay extra, restropective stocking fees, and threatened to blacklist those who talk publicly, and
(b) you personally have not put any pressure on New Zealand businesses supplying Countdown.

If the answers are Yes, then we await the results of the ComCom investigation to confirm his answers or otherwise.

If he feels he cannot at least give an outright guarantee to (a), shouldn't he being declaring Countdown's policy very explicitly and mounting a full internal investiogation to ensure he has no errant managers?

I think you will find no assurances can be given as based on the emails Shane Jones was clearly reading from in Parliament i suspect he knows more than he has let on.

screwing the suppliers helps the supermarkets maintain there very nice margins- dont believe what they say its bollicks

Some one feels this could be a crack at what the Aussies are doing to us over the ditch (as it were)?

The whole thing is connected, they give our suppliers a hard time in their Australian supermarkets so they can have a better deal in their NZ stores. Austraiian suppliers are having a hard time as well, this is how Woolworths do business.

Perhaps other companies under the influence of Mr Waters should also be looked at.
A company's culture always flows from the top down.

it is seldom the case that the blame lies with the leadership exclusively. More than often, the problems start at the lowest level, and then start to propagate bottom up. And most ironically, even though entire organization / nation (generally), or subordinates / citizens (individually) are clearly at fault, the faulty party immediately and invariably points fingers at the leadership, using their weak, fragile and overused excuse that they were simply “following orders”. The latter is also known as typical Nuremberg defense. Thus, more than often in actuality, the leadership ends up shouldering the blame, in the spirit of accountability, as a result of the underperformance, inefficiencies and flaws of their subjects.
http://dshenai.wordpress.com/2013/04/28/fish-doesnt-always-rot-from-head-down-sometimes-from-tail-up-too/ .

Campbell Live last night reported an affidavit it had in which a major supermarket supplier alleged it paid $500 per week to a supermarket buyer in order to have products stocked. It's puzzling that no other media had followed up on or reported this development today. There may be major legal issues surrounding these types of payments and the supermarket chain involved could at least issue a "categorical denial" has Countdown has last week on Jones' allegations.

Meantime, Countdown One Card holder discount vouchers for $15 and $1 off a coffee product have arrived in the mail: Hundreds of thousands of customers are being prompted to remain loyal. Those who don't swipe their cards and have gone elsewhere could be usefully targeted by Countdown if it wanted to make further offers?

If the 8700 who had reportedly signed a protest Facebook page last week were spending $120 each a week at a supermarket, their annual value would be more than $50 million. enough to take the cream off any supermarket's profits.

One can see why crisis management, even of 8700 consumers, is vital for Countdown and its competitors.

As a One card customer of Countdown spending $200+ a week, our adult children shop there as well and we have suspended our shopping with Countdown until it either becomes clear if Countdown or Jones are telling the truth. No doubt Countdown management will be monitoring the change in One card customers buying and will be able to gauge the views of their loyal customers accurately. The almost categorical denial by Woolworths management was probably unwise as if Jones does have hard evidence then Woolworth and its senior management will look like Blackmailers and liars. A better approach would have been to deny the methods Jones complained of were company policy and if on investigation they found a "Rogue Buyer" had used them the suppliers would be compensated and the staff involved dealt with. It seems that the lessons of Brown, Banks and the UK News of the World have still not be learned.

With 18,000 employees in NZ there are bound to be a few bad eggs who seize opportunities for kick-backs and the like. Are they going to reveal their practices to top management? Of course not. What surprised me re the Campbell Live affidavit was that someone is prepared to acknowledge that they have been engaging in paying kickbacks, secret commissions or whatever you like to call it. Who are the real criminals here?

We use to have 3 players in the supermarket industry Foodstuffs (New World, PaknSave), Progressive Enterprises (Foodtown, Countdown) and Hong Kong Dairy Farm International (Woolworths) until the Commerce Commission approved the sale of Woolworths brand (not to be confused with the Australian brand) to Progressive Enterprises which in the end was bought by Woolworths Australia. At the time the Commerce Commission said it would be great for the customers, they didnt think about the supplier did they!!

I think we should take Waters word for it - don't you, after all he is an Aussie you know cousins of ours, all picked by the best of British judges and there is no issue over there of hoodwinking people, nor is there any problems with honestly of course NSW police are just a glitch (yep new tui ad, only problem they have is they were found out).

All there big business's are honest, they just follow the American model.... and isn't this just "normal" business practice that the Americans follow...

Still I am not sure how they demand payments for loss of profits when they set the price points? best business model I have ever seen....
who need honesty, profits are more important after all.

Doesn't it bring a wan smile to your face, to hear Ralphie's faux outrage, describing Shane Jones's allegations as "highly offensive". And how he waxes on about being a director of this-company-and-that,: as if he's a paragon of unimpeachable business propriety to be held in the highest regard. Why doesn't he just come out and say -- Countdown never exerted pressure on its suppliers for ex gratia payments to stock their goods and they were never threatened with a boycott should they not acquiesce to their product managers' demands.

Remember, Ralph Waters is cut from the same cloth as Dr. Roderick Deane. And we all recall that when Deane was chairman of Telecom, how that company regarded its customers -- private and business -- showing all the commercial magnanimity of someone taking coins from a blind beggar's bowl.

Isnt this the free market at work? Countdown owns /leases the premises and offers space & marketing and jobs & training.Of course they trade space & margins.Suppliers wont like that but its up to them.They dont have to accept and the hot air from Labour should not change that.What is lacking is another Supermarket chain to increase the competition between Supermarkets eg Aldi.

Absolutely correct, if the suppliers do not like the terms, they look elsewhere? No? Well! I ask, Since when have producers been able to tell retailers/processors what they must pay them for their produce?? The only wrong that I see that may be happening is if shelf stock buyers are asking for, and personally pocketing kick backs from producers. If Shane Jones has proof of that then the correct thing to do surely is for him to inform the owners of the Supermarket who in turn should inform the Police?
Also is it not illegal to pay kickbacks/bribes!!? Is this the reason for producers/suppliers "silence"?

I would agree that a third supermarket chain may be the answer, however Aldi are not the solution. They have a reputation of being the absolute cheapest on the block and screw suppliers even more than their competitors. The opinion in the UK is that they have wrecked the supermarket model there something awful. And they have even less choice than Pak n Save as they operate on the Gubay/3 Guys model that was in Auckland about 30 years ago.
Also Supermarkets can be a high stakes game. Just look at the ceiling high stacks in a Pak n Save. I estimated about $40 million of stock in our local P n S. That's a hell of a lot of bank debt to service, it's no wonder a turnover of $2 million a day is breaking even.

How about the 'legal' tax evasion these Aussie chains practice. Bunnings reported 700+ million in sales in NZ and only made 1m taxable profit! Wake up NZ. if you want to shop responsibly support known kiwi business. Co-ops like foodstuffs and Mitre 10.These guys at least contribute to our tax system. they are also no doubt better to their suppliers too.

So Sam you are "in the know" that Mitre 10 & Foodstuffs, New World, 4 Square, Pack n Save, dont charge their supliers for shelf space etc. May I suggest you give yourself a slap up the side of the head, your still asleep!

Accepting that Ralph Waters has an outstanding pedigree, you can only conclude that he is seriously out of touch with what is happening inside this company on a systemic basis. Progressive's culture and practices are an open scandal in the FMCG world.

Great to see a National MP standing up for the rights of the little guy. Oh wait, hang on a minute.........

When the Com Com have finished exposing the supermarket sector for what they really are and dealt to them big time hopefully they should then turn their attention to the oil companies cartel and bust that one open. heavy fines and jail time for the Directors CEOs and senior management is the only way to bring these corporate crooks into line

I can only hope that if these claim by Shane Jones are wrong ,then he retreats to his hotel room behind closed doors and does what he is known to do,

As a supplier I am very confident that the claims made are correct. We experienced the bullying of a few years back when Woolworths sent their hit men over to slice as much as they could off Progressive suppliers' margins. Although once they got what they came for they pretty much left us in peace and haven't been too bad. Foodstuffs are probably more problematic for us now. It is tougher to make money out of them given their archaic supply model. We need more serious players in the market...

Here how it will end:
The Aussie corporate will ring their pals in Canberra and threaten to stop their donations (doesn’t really matter which parties in) Canberra will then ring layers in wellington who will be warned of the “dire consequences” for NZ if this “witch hunt” as they will call it is allowed to go ahead. Foodtown here will in a blaze of publicity and openness (yer right) will launch a high profile investigation and lo and behold one or two will be found to have “crossed the line” and breached the companies policy, they will be hung out to dry by the company whilst the company of course makes it worth their while by paying them out via the back door (no doubt some staff who were about to retire anyway). After all they were only following real company policy and the company being good corporate citizens will be sure to reward/treat them as they do all their clients and suppliers … ComCom as toothless as they are will at same time launch a big and noisy “were out to get them campaign” and of course once the luckless hung out to dry people have been offered up by Foodtown ComCom will fold its tent all the time telling us what a good job they have done.

Life goes on crooked Aussie practices will continue and the guy at the top will get a big bonus..

Got to love life here in Gods own where no one in Wellington has the balls to back up anything and public servants are too worried about their snouts in the trough to actually do their job.

I wonder if I sound cynical?

Has anyone noticed but when the news broke last week about Countdown and their bullying tactics not once did it make the front page of the Herald, why is that do you think?? Maybe because Countdown is one of the Heralds biggest clients. You cant pick up a Herald without some sort of Countdown advertising. The Herald cant been seen to be smacking the hand that feeds them now can they!! Woolworths Australia even have our biggest newspaper in their pockets. Who else is there do you think?!!

remember when food town and foodstuffs tried to block 3 guys from buying soap powder from lever bros?