Foodstuffs North Island might like to call it six months of madness: the short period up to early 2015 when it registered restrictive covenants over seventeen different properties designed to keep out competition; a process leading to fines totalling $3.5 million.
A formulaic approach to penalties set out in the Commerce Act saw Foodstuffs facing a maximum fine of $7.3 billion: ten per cent of Foodstuff North Island’s annual turnover multiplied by seventeen.
A much lesser $3.5 million fine was approved by Justice Radich in light of Foodstuff’s steps to remove existing covenants, its claim the covenants were not a deliberate attempt to restrict competition and a misunderstanding back in 2015 that its actions did not breach the Commerce Act.
The High Court was told Foodstuff’s board decided as a matter of policy in 2014 to tie up nearby commercial sites to protect local market share. This came immediately after the 2013 merger of Foodstuffs Wellington and Foodstuffs Auckland to create Foodstuffs North Island.
Covenants were registered against title to land adjoining existing or potential Foodstuff sites, primarily in central Wellington, the Hutt Valley and Napier, to prohibit businesses at those sites selling food products.
This had the effect of hindering competition to its Pak ‘n Save, New World and Four Square stores, in breach of the Commerce Act.
Foodstuffs agreed to remove the restrictive covenants only after Commerce Commission intervention.
In the High Court, Foodstuffs pleaded naïve innocence, while agreeing that registration of restrictive covenants was an anti-competitive practice in breach of the Act.
The court was told Foodstuffs has removed covenants from land it still owns and has advised third parties who purchased land containing restrictive covenants benefitting Foodstuffs that the covenants will not be enforced and that Foodstuffs will assist in their removal.
Their removal will increase resale value of land previously encumbered by the restrictions.
Commerce Commission v. Foodstuffs North Island Ltd – High Court (16.08.24)
24.199