The government must break up the supermarket duopoly and stop major players enjoying high profits at the expense of consumers, a consumer watchdog is urging.
The Commerce Commission's grocery report released on Wednesday revealed competition in the sector has not improved and margins and profits are too high.
Consumer NZ said it supports the grocery commissioner Pierre van Heerden's plans to ramp up regulation and enforcement - which could come with fines of up to $10 million.
But even more drastic change was needed, Consumer NZ head of research and advocacy Gemma Rasmussen said.
"Ultimately, it is the role of government to step in and talk about structural change and market break-ups, if they feel that the supermarkets aren't complying."
It was disappointing the supermarkets had not made the changes the commission wanted to see, she said.
Critics says high supermarket profits are coming at the cost of New Zealand consumers who are doing it tough in a cost-of-living crisis. Photo: Unsplash/ Markus Spiske
But Woolworths and Foodstuffs both said they had made changes to bring better value for consumers.
That was clearly not enough for van Heerden, who said the report painted a concerning picture of the $25 billion sector.
Minister of Commerce and Consumer Affairs Andrew Bayly said the commissioner was right to use his powers more forcibly and the government would support him to do so.
But government intervention to break up the duopoly would be a "last resort", he said.
"What we'd like to do is support the commissioner in the next phase two of his approach: to strengthen wholesale arrangements, make sure that supplier arrangements are good as well, and bring more transparency around the sector," Bayly said.
The Commerce Commission would, over the next year, investigate the supermarket giants' "land banking" - holding land without actively using it, to ward off competitors buying it up.
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Bayly said he would be watching that closely.
"If it's found that those land holdings are contrary to the Commerce Act, then I would expect the Commerce Commission to give me advice around that.
"That may involve some divestiture if that's the case."