The Australian company Progressive Enterprises won the Roger Award in 2006, for its lockout of over 600 distribution centre workers who wanted to negotiate a national collective agreement. This was “the biggest industrial attack seen in Aotearoa for years”. In its citation, the Roger Award panel noted that: “During the Progressive lock out the stunning silence of some of the biggest losers from it – suppliers who couldn’t get their stock delivered or sold – was notable. Rather than leap to the company’s defence in the public arena, after months of fighting with Progressive over supply contracts, they seemed to be quietly cheering from the sidelines as the kind of collective action denied them by the Commerce Act and the norms of competition allowed the workers at least to stand up for their rights. More than one supplier ensured that the picket lines were well fed” (the full 2006 Roger Award Judges’ Report can be read at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2006.pdf.Ed.) 

Australian banks have a dreadful reputation for extracting the last dollar from their involvement in New Zealand, and the profits from banking that go offshore each year are a national scandal. The five big banks (although this includes Kiwibank, which is New Zealand-owned) together made a before-tax profit of $5.3 billion last year. Although Progressive Enterprises took the Oscar in 2006, it is not a habitual finalist in the Roger Award. But that does not mean that Countdown is a neutral or benign player in the New Zealand market. The notion that small (and not so small) business might be (quietly) on the side of striking workers against a behemoth capitalist organisation is practically unique in New Zealand, I would have thought. Small business has always been the bastion of pro-capitalist enterprise.

Countdown’s Shakedown

Thus it was that Shane Jones, a Labour MP on Labour’s Right wing, lifted the lid on the organisation in February 2014. Using the same kind of take no prisoners approach apparently adopted by his opponents, and under the cover of Parliamentary privilege, he accused Progressive Enterprises of requiring retrospective payments from New Zealand suppliers to compensate for losses by the company over the past year. The specific allegation is as follows, as reported on Stuff.co.nz: “A number of firms have been told their products will not be placed on the shelves of our supermarkets unless they make backdated payments and offer remuneration for losses sustained by the supermarket”.

There is a kind of Alice in Wonderland element to this, which makes you wonder whether Lewis Carroll’s famous children’s story is a profound critique of capitalism, rather than a slightly barmy story. I mean, aren’t the suppliers supposed to be paid by the supermarket, rather than doing the paying? Shane Jones explained how the system operates: "’This is how it works. The Aussie-driven owners and managers of the supermarket chains - and I know their names because I have been contacted by the people who were in the room - are saying to our Kiwi managers and our Kiwi firms: ‘You will hand over a cheque for my historic losses or you will never gain shelf space in the supermarkets. If you breathe one word of this, we will blacklist you permanently’, he said”.

After the great revelation in Parliament (wouldn’t Winston Peters have enjoyed that one), there was the inevitable categorical rejection by Progressive Enterprises, a friendly, family-oriented organisation that loves its suppliers and would never do anything nasty like that. And there it might have stayed, had it not been for a partial confirmation by an ex-National MP, Katherine Rich, who is now Chief Executive Officer of the Food and Grocery Council. She said that she was 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," she said. “This is a serious issue that is new to the New Zealand grocery sector and we view it as an unwelcome development. We have asked members to report further occurrences".

The Food and Grocery Council is not the revolutionary branch of the NZ Communist Party. Far from it.  It is an organisation that upholds and promotes the interests of those in the grocery sector, and by far the biggest players are Progressive Enterprises itself and the other half of the duopoly, Foodstuffs (which owns, among others Pak’n Save and New World. Ed). Rich’s intervention tacitly confirmed Shane Jones’ allegations, and led to the Prime Minister supporting a Commerce Commission investigation and, even more unusually, John Key argued that suppliers be able to provide confidential information to that Inquiry. 

It Won’t Be Pretty

The Commerce Commission is itself an interesting body. It has two functions: to prohibit restrictive trade practices and to regulate anti-competitive practices. Essentially its role is to promote competition, and I have little doubt that Progressive will argue that this is exactly what it is doing. It is likely that the investigation will be taken primarily under the first of its functions, and specifically to investigate the “taking advantage of market power”. The Commerce Commission is not a toothless organisation. It has a range of investigative and statutory powers similar to the Police. It also has a dinky little tool called the Section 98 notice; that can require full disclosure of company documents.

There are complications in this case, and no doubt Progressive’s lawyers will be right onto them. The first is jurisdiction. Progressive is an Australian company operating in New Zealand. Any decisions that stem from up the line and over the ditch are potentially outside the jurisdiction of the Commission.  The plea of no jurisdiction is, of course, a lovely tool of transnationals everywhere. Second, is the plea of “commercial in confidence”. Lawyers can, and will, argue that material cannot be handed over because it will substantially damage the competitiveness of the organisation. As the Commerce Commission is charged primarily to protect competition….Well, it won’t be pretty.

No doubt there are many other legal barriers that will be raised. Should the claim of taking advantage of market power be proven, there are substantive penalties available: $10 million, or three times the value of any commercial gain, or 10% of the turnover of the company (note, turnover not profit).  These figures are huge. The outcome of the investigation will be interesting (by the way, do not hold your breath – with so much at stake, the process could take years). Can a bully boy foreign company (and particularly an Australian one) come in here and bring with it tactics that might be common practice in the country of origin, but not here? Might we find the principals arguing “we’re just Australians, we didn’t know any better”? I am not enough of a lawyer to know, but I suspect this might be somewhat of a landmark investigation.

Just on another note, Adam Dudding did an expose of how the Australian supermarkets control their suppliers.  By using shelf placement as a disciplinary tool (four cans across or two, top shelf of Siberia), sales of certain products can be affected. Second tier bidding wars, being harangued at Head Office, being forced to pay for loss-leader ‘specials’ (while the supermarket maintains its own mark-up) and other tactics are apparently part of the robust grocery scene in Australia.  http://www.stuff.co.nz/business/industries/9727417/Behind-the-supermarket-bargains