The Commerce Minister chooses the wrong scapegoat to demonstrate supermarkets' anti-competitive behaviour: Ponsonby locals are spoiled for choice when they go grocery shopping
Freshly baked pastries, European cheeses, Samoan chocolate, brightly coloured fruit and veges and flowers – Gurmukh Mann knows that his customers are willing and able to pay for the best.
In March, Mann took over Bhana Brothers grocery store, an 80-year-old institution on Auckland's most elegant retail strip. He's renamed the Ponsonby Rd shop My Grocer and lined its shelves with imported food and deli products. “Everyone knows the famous Bhana Brothers, especially because of their big buckets of flowers outside, and I could immediately see the potential to carry the concept on but in a slightly different way,” he tells Broadsheet.
At a time when the two big supermarket chains are under scrutiny for locking out newer, smaller competitors, Mann is not the only challenger in Ponsonby.
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Not only has Woolworths NZ just this month opened a second, smaller Countdown Metro on Jervois Rd, supplementing its existing supermarkets, but locals also have the choice of heading 500m down College Hill to the Victoria Park New World, or cycling along Richmond Rd to Farro Fresh.
That's all a tad awkward for Commerce Minister David Clark, who introduced a bill to Parliament under urgency last month, on the night of the Budget, to prevent Woolworths and Foodstuffs using land covenants and lease exclusivity agreements to maintain their market dominance.
“Our supermarkets have effectively been engaged in land wars," he told Parliament, "which in some cases has left suburbs and shopping centres without choice. An example of this is in Ponsonby in Auckland, which is only serviced by Countdown.”
He upped the ante last week in a press release in which he described Ponsonby as an example of the impact of restrictive covenants.
But locals say there are no such covenants in place. He's chosen to take on the wrong business community, they say. Indeed, lawyers who specialise in such covenants say it would be nigh-on impossible to lock up a retail strip such as Ponsonby Rd, with hundreds of land blocks held by almost as many owners.
It's understood there is an exclusivity agreement written into the 20-year lease on the Cider Building – the modern five-storey office block on Williamson Ave, anchored by a big 4,000m² Countdown supermarket, including two floors of underground carparking. The owner is the property company Oyster Group, whose chief executive, Mark Schiele, declined to comment.
Last night, Clark said the lease agreement would likely be covered by the new Commerce (Grocery Sector Covenants) Amendment Bill, which had its third Parliamentary reading to pass into law last night. "It is a lease agreement in which Countdown has an interest," he told Newsroom.
"The test would be whether the exclusivity provision in the lease has the purpose, effect or likely effect of impeding a retail grocery store or other retail store which competes against Countdown. However, this would be for the courts to decide."
Newsroom has previously reported on such extraordinary legal battles as one in Auckland's Highland Park, where two adjacent Countdowns are locking out a Pak'nSave. And in Prebbleton, just outside Christchurch, where Foodstuffs sold an attractive piece of land to a shopping centre developer, on the covenanted condition that opposing liquor brands could open in the new centre.
But Countdown spokesperson Kate Porter said the company had no leases or property deals in Ponsonby that would restrict competitors.
"Our lease agreements are commercially sensitive. However, irrespective of this, we don't consider that any of our leases are impacting or have impacted competition in Ponsonby – which, aside from all the retailers we have discussed, also includes one of the country's most successful New Worlds and an extremely busy Farro.
"We’re really unsure why the minister has singled out Ponsonby," she added. "My take is that it’s seemingly a place with one supermarket brand but as below there’s actually a huge array of competition, including a New World. There are of course places where we are more present historically than other retailers, and vice versa."
Beyond that single lease on the Cider Building, Ponsonby commercial property agents and owners know of no restrictive covenants. A company considering opening a grocery store in the big Ponsonby Central retail centre, owned by well-known local Andy Davies, was told there was no legal impediment.
And Daniel Friedlander, chief executive of Samson Corporation, says the problems aren't covenants or lease agreements – the problem is that there's no remaining space to build a supermarket. "I don't think there's enough sites," he said. "The last big site the one on Williamson Avenue where they built the Countdown."
Samson Corporation owns retail properties up and down Ponsonby Road, but no properties big enough for even a Metro supermarket. "No, we wouldn't have the parking for them," Friedlander said.
Any covenants that did exist would be historical, set in place by previous local landowners, he said. "I wouldn't have the foggiest why the Minister is naming Ponsonby. You'd have to ask him."
Woolworths' big competitor is Foodstuffs, which owns the New World, Pak'nSave and Four Square brands. It says it doesn't have any covenants in place in Ponsonby.
Under pressure from the Commerce Commission, Foodstuffs North Island had already agreed to end the use of restrictive land covenants and exclusivity provisions in leases, and immediately started a process to remove all existing such clauses. In the meantime, the company's chief executive, Chris Quin, had given an undertaking they wouldn't enforce any covenant or exclusivity provision.
To date, 78 of 135 restrictive covenants have been removed, the company says. The remaining covenants are registered on land that Foodstuffs North Island no longer owns, so they are approaching the owner of each parcel of land to remove these.
Both supermarket chains say there will be some covenants that are legally difficult to remove, and so they are welcoming the new legislation that forcibly removes them.
