Foodstuffs co-ops to appeal decision to block merger

Key points

• Foodstuffs co-ops to appeal decision to block merger
• The Commerce Commission believed a merger would have harmed competition in the supermarket sector
• The co-ops would file a notice of appeal with the High Court
• A merger would have combined the two co-ops that operated more than 500 stores across the country

The Foodstuffs co-operatives will appeal the Commerce Commission's decision to block the merger of the supermarket operators.

The North and South Island co-ops have more than 500 stores across the country, including the Four Square, New World and Pak'nSave brands, and voted to their operations into one national co-op earlier this year.

However, the competition regulator declined the merger in October, saying it would have harmed competition in the supermarket sector.

The co-ops said they would file a notice of appeal with the High Court, stating the commission's decision was wrong and a merger would not substantially lessen competition.

Foodstuffs North Island chief executive Chris Quin, who was set to run the proposed nationwide co-op, said the merger was "essential" to help competition in the grocery market.

"Customers have been asking for better value at the checkout, and we believe this merger is the single biggest way we can keep improving to achieve that," Quin said.

"By merging our resources, we can make our buying and operations more efficient, which ultimately translates into better prices for New Zealanders."

In its decision, the commission said the merger would increase the buying power of the supermarket operator, and the merged entity "would likely be able to extract lower prices from suppliers and/or otherwise adversely impact suppliers in the relevant markets".

The co-ops disagreed, and said they did not compete with each other when purchasing groceries, and bought to meet the demand of their customers who were in separate geographic markets.

"In general, purchases by one co-op do not affect the quantity purchased by the other, as they are not competing to serve the same customer," it said in a statement.

The co-ops also hit back at the commission's warning that a merger could increase the likelihood of coordination with Australian-owned rival Woolworths.

"We will continue to compete hard against the big Aussie supermarkets. Co-ordination hasn't happened in the past, it doesn't happen now, and it won't happen in the future," said Quin.