By Stephen Wright

WELLINGTON, New Zealand--New Zealand's competition regulator said compelling the dominant supermarket operators to sell some of their stores, or government investment in a new competitor, are options to reduce grocery prices that are among the most expensive for developed nations.

The Commerce Commission on Thursday released a draft report on its investigation into supermarket competition, which found that the two main operators have consistently high profits by international standards and exercise too much power over suppliers. Loyalty programs for shoppers also are confusing and make it difficult to compare prices between retailers.

Ownership of most of New Zealand's supermarkets is divided between Australia's Woolworths Group Ltd. and franchise arrangements under the Foodstuffs cooperatives. The commission plans to make final recommendations to the government by November.

The regulator said requiring the sale of stores to create a third grocery competitor--or the government acting as a joint venture partner for a new investor in the industry--should be considered if other measures to increase competition aren't feasible or take too long to produce results. Its other proposals include a code of conduct with suppliers and increased wholesale access to groceries.

Separating the existing supermarket operators into retail and wholesale businesses is also a possible option for boosting competition, the report said.

Among the OECD group of wealthy nations, New Zealand's grocery prices ranked sixth highest and were fourth highest when considered as a proportion of income, the regulator said.

Write to Stephen Wright at stephen.wright@wsj.com

(END) Dow Jones Newswires

07-28-21 1809ET