Latest / Best of Business / Andy Matthews: competition lawyer on the Commerce Commission taking Foodstuffs North Island and Gilmours Wholesale to court

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Andy Matthews: competition lawyer on the Commerce Commission taking Foodstuffs North Island and Gilmours Wholesale to court · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks Be follow
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  Speaker 1: right now.
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  Speaker 2: Foodstuff's North Island you might have heard about this in
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  Speaker 2: the news today and it's subsidiary Gilmore's Wholesale are being
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  Speaker 2: taken to court for what the Commerce Commissioner is calling
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  Speaker 2: cartel conduct. The comcommon ledges that the two supermarkets pressured
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  Speaker 2: a grocery supplier to sell to them rather than directly
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  Speaker 2: to another business. Foodstuffs North Island is denying any wrongdoing
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  Speaker 2: in its practices. Andy Matthews is a competition lawyer at
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  Speaker 2: Matthew's Law and is with me tonight. Hi. Andy, right,
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  Speaker 2: good to have you on this show. You very well,
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  Speaker 2: thank you. What do you make of the case that
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  Speaker 2: the Commerce commission Well, what we know of the case
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  Speaker 2: that they're taking.
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  Speaker 3: Yeah, look, that's a good point.
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  Speaker 4: We don't have the details and it's just allegations at
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  Speaker 4: this stage until it goes through the court process. But
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  Speaker 4: I guess backdrop, there's a.
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  Speaker 3: Few things going on. New Zealand law has some of
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  Speaker 3: the broadest sort of cartel laws.
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  Speaker 4: In the world and what has defined as a cartel
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  Speaker 4: provision and a contract, arrangement or understanding is a lot
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  Speaker 4: broader than you or I might have thought before this
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  Speaker 4: law was passed, and certainly even a lot of lawyers
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  Speaker 4: get a bit confused on this.
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  Speaker 3: It's pretty much any agreement between actual or.
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  Speaker 4: Potential competitors which relates to price, quality, capacity.
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  Speaker 3: Supply, all of those things.
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  Speaker 4: And what it means is pretty much any agreement with
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  Speaker 4: an actual or potential competitor probably has a cartel provision.
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  Speaker 4: Then it's up to then to the party who's entered
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  Speaker 4: into the alleged cartel provision to demonstrate that an exception
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  Speaker 4: in the Commerce Act applies and that there are ones
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  Speaker 4: for sort of collaborations to joint ventures, you know, joint
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  Speaker 4: buying groups, but also something called vertical supply, and it's
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  Speaker 4: it's the onus is on the defendant. But what we
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  Speaker 4: don't know here is whether food Stuffs and Gilmores have
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  Speaker 4: just gone to the supplier and said, hang on, you
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  Speaker 4: supply us, we supply them, you also supply them, but
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  Speaker 4: we enter an exclusive supply agreement, and we think that's
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  Speaker 4: a protected vertical supply under this exception in the Commerce Act.
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  Speaker 3: I'm just speculating. I'm not saying it does.
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  Speaker 4: I'm not saying it doesn't, but the Commerce Commission is
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  Speaker 4: obviously incredibly concerned about independent supply to that doesn't have
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  Speaker 4: to go through the supermarket, so that say, for example,
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  Speaker 4: a new supermarket player can get direct access and suppliers
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  Speaker 4: are free to and free of of fear of sanction
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  Speaker 4: and those sorts of things. And the Commission's media release
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  Speaker 4: says that the supplier wanted to supply the hospitality customer directly,
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  Speaker 4: but they were quote persuaded to sell to food stuffs
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  Speaker 4: and gilmore so sort of routed all that way rather
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  Speaker 4: than competing with food stuffs to sell the product to
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  Speaker 4: the hospitality customer.
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  Speaker 2: So, just speaking generally, let's move await from these two
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  Speaker 2: businesses in particular. But if you wanted to defend, like
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  Speaker 2: somebody comes along and says, right, you're being anti competitive
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  Speaker 2: because you're stopping you know, this business from being able
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  Speaker 2: to buy the honey or whatever it is, then can
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  Speaker 2: it can your excuse be well, I'm I'm wanting to
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  Speaker 2: be the exclusive provider of this product and that's why
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  Speaker 2: we're signing this deal, and you're not allowed to sign
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  Speaker 2: a deal with someone else. Is there a legitimate excuse?
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  Speaker 3: Well, it can be.
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  Speaker 4: But taking a step back, is you raised a very
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  Speaker 4: good point. You talked about competition. Nowhere in my description
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  Speaker 4: of the Cartel prohibition did I mention competition. And the
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  Speaker 4: reason is it's it's sort of it's a type of law.
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  Speaker 4: It's deemed to be bad no matter what. It doesn't
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  Speaker 4: even talk about competition. There's nothing in the Cartel provision prohibition.
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  Speaker 4: And this is where it's a bit weird. If a
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  Speaker 4: bunch of doctors say, let's reduce our prices, and they
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  Speaker 4: will agree that that is a Cartel provision, So then
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  Speaker 4: there's also a general competition test.
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  Speaker 3: The use of market power.
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  Speaker 4: If it's anti competitive and there are contracts it's are
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  Speaker 4: anti competitive, it be surprising if the Commission isn't isn't
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  Speaker 4: alleging that as.
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  Speaker 3: Part of its statement acclaim.
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  Speaker 4: But the thing about the Cartel provisions, it's a bit
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  Speaker 4: like the Fair Trading Act.
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  Speaker 3: It's kind of they've got you.
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  Speaker 4: If they've got you, they don't have to prove anti
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  Speaker 4: competitive harm, just that you've entered this restrictive agreement. But
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  Speaker 4: that's why the exceptions are so important. But I should
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  Speaker 4: have mentioned you raised a good point is there's still
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  Speaker 4: a general competition thing. So if they say no, no, it's okay,
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  Speaker 4: it falls within the vertical supply exception, Well that's going
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  Speaker 4: to be matter for the courts.
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  Speaker 3: It's new law. The Commission have.
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  Speaker 4: Quite a narrower perspective on what that exception covers to
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  Speaker 4: some others and what's protected and what's not.
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  Speaker 3: So the fallback is a competition.
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  Speaker 2: Argument, right, So is it it would an exclusive deal
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  Speaker 2: be okay or not? Is that even?
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  Speaker 4: Well it can be. People do it all the time,
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  Speaker 4: but they do need to be aware of the law
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  Speaker 4: and that the law is really complex and really counterintuitive.
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  Speaker 4: Like if I start by saying, as did to you, Oh,
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  Speaker 4: any agreement with a competitor has probably got a cartel.
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  Speaker 3: Provision in it.
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  Speaker 4: That's that's not that much of an exaggeration, and that's
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  Speaker 4: our starting point. So then you need to review it
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  Speaker 4: and you go, does this fit within one of those exceptions?
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  Speaker 4: Do we need to pull it back a bit so
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  Speaker 4: that it falls within the wording of the law And
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  Speaker 4: the sort of the is the spirit of the.
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  Speaker 2: Law, And it's quite a hard thing to prove.
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  Speaker 3: Well, yeah, it could be. Yeah, this is the first case.
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  Speaker 3: This is the first case testing this sort of stuff.
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  Speaker 4: That that that I'm aware of as human that it's
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  Speaker 4: not settled, because quite often these cartel cases are settled
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  Speaker 4: because it can be it can be hard to to
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  Speaker 4: prove prove that that it's okay. Look, I don't know
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  Speaker 4: whether this is hard or not because I don't like you.
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  Speaker 4: I've got a bit of a bit of a guide
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  Speaker 4: from the Commission in terms of the media release. But
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  Speaker 4: it's it's the Commissioner obviously taking it pretty seriously. They
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  Speaker 4: are wanting to be a braver and bolder litigants as
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  Speaker 4: they been asked to be by the Commission. It's to
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  Speaker 4: say that hasn't they haven't. They haven't contested as much
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  Speaker 4: through the courts on pure competition grounds. It's tended to
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  Speaker 4: be these types of cartel cases. The interesting thing about
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  Speaker 4: this that you haven't asked about is, and having done
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  Speaker 4: a bit of grocery work, I'm a bit of a
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  Speaker 4: geek about this. Is there's something called literally the Geeker,
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  Speaker 4: which is the Grocery Industry Competition Act, and that includes
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  Speaker 4: a code of conduct and one of the big prohibitions,
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  Speaker 4: or one of the big requirements, is that the regulated
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  Speaker 4: grocery retailers. So that's the two food Stuff's companies and
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  Speaker 4: we'll always have to act in good faith in their
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  Speaker 4: dealings with suppliers. So for me, that's a particularly interesting
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  Speaker 4: aspect to this because good faith is you know, it's
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  Speaker 4: sort of one of those things we don't know quite
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  Speaker 4: how a court interprets.
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  Speaker 3: What's good faith and what's not good faith.
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  Speaker 4: And I think the Commission have bided their time to
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  Speaker 4: pick the case that they think is the right one.
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  Speaker 4: And I don't think they will have issued you know,
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  Speaker 4: we'll haven't issued the proceedings yet, but it's said to go.
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  Speaker 4: I don't think they'll have done this lightly. But I
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  Speaker 4: do wonder whether.
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  Speaker 3: Food Stuffs might say, well, come on vertical supply agreement.
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  Speaker 2: It's okay, yeah, right, Andy, I'll keep an eye on
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  Speaker 2: that geeker, the geeker and when the case goes through court.
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  Speaker 2: Appreciate your time This evening, Andy Matthews, competition lawyer with
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  Speaker 2: us explaining that case. It's been taken by the Commerce
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  Speaker 2: Commission against food Stuff's North Island and its subsidiary Gilmore's Wholesale.
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