Complaint about high prices in airport retail monopoly

International retail company LagardèreAWPL has quietly established a near monopoly on convenience stores, airside and landside in NZ airports.
It now operates at least 31 stores at eight airports, grossing $219m revenue last year, but reduces its tax liability by paying management fees to its parent company.
A small Newsroom survey indicates consumers will pay from 15 percent to 110 percent more at Relay and its other convenience stores than they would at supermarkets and stationery shops outside the airports. Newsroom staff in Auckland, Wellington and Christchurch surveyed prices for confectionery, soft drinks, cigarettes, books and consumer technology.
The biggest premium found was 111 percent on a Whittaker’s peanut slab – at $3.99, more than twice what a customer would pay in a supermarket. A 40g tin of Eclipse mints was $6.99 (56 percent above the odds) a pack of Dunhill cigarettes was $56.99 (19 percent); and the Lee Child paperback Safe Enough was $38 (15 percent more than Whitcoulls or PaperPlus).
The Commerce Commission reveals it received a complaint last year about prices being hiked at the company’s Aelia Duty Free stores at Auckland International Airport, after the airport granted it an exclusive “single duty-free operator contract”. The commission took no action.
Vanessa Horne, its general manager of competition, notes: “High prices for goods at an airport might reflect different underlying costs rather than a lack of competition.”
Between Lagardère’s Relay, Aelia and Hub Convenience brands, it has either a landside or airside monopoly on convenience retailing (or travel essentials, as it calls its wares) in seven airports: Auckland, Wellington, Rotorua, Palmerston North, Nelson, Christchurch and Dunedin.
Its only competition is the Lotte Dutyfree store airside in Wellington, and PaperPlus and the Remarkable Sweet Shop in Queenstown. In Auckland, there is a small independent store down the regional end of the domestic terminal, and another independent near international arrivals.
But airside at the country’s biggest international airport, its presence is overwhelming with its convenience store brands (Aelia Duty Free, Relay and Hub Convenience) as well as the Mac, Benefit, All Blacks, Cape to Bluff, Around NZ, Merino Collection and TikiTour stores it operates.
That monopoly is no accident, and no secret: Auckland Airport announced in December 2022 that it would “transition to a single duty-free operator”, and that took effect last year when competitor The Loop Duty Free lost its licence. This year, the airport is issuing a tender for a single long-term duty-free contract, starting next year, and LagardèreAWPL is the frontrunner.
It’s a similar story in Christchurch, where the company has five stores – three Relays, one Aelia and a TikiTour. Even some seemingly local brands, like The Nelson Store at Nelson Airport, are mere fronts for Lagardère.
The company’s Sydney-based head of communications, Jacqui Sandford, wouldn’t answer a series of direct questions from Newsroom. Rather, she emailed a short general statement.
“LagardereAWPL is proud to operate over 150 stores across Australia and New Zealand, offering travellers a range of products to enhance their journey across travel essentials, food service, duty free and specialty,” she says.
“We are aware of some instances of products available at lower prices due to the pricing and promotional strategies of other retailers outside the airport, however we continue to monitor the prices of our products regularly, and work with our brand and business partners to ensure travellers get value for money when shopping with us.”
New Zealand’s airports gave mixed responses to questions about the monopolistic pricing. Rotorua Airport chief executive Nicole Brewer refused to answer any questions at all on grounds of commercial sensitivity, despite the airport being 100 percent council-owned.
Queenstown Airport chief operating officer Todd Grace, by contrast, gave a full explanation about the company’s efforts to showcase local retailers like The Remarkable Sweet Shop, alongside Aelia Duty Free. “This helps us to create a distinctive sense of place,” he says.
All the retailers at Queenstown are separately owned and their contracts contain clauses requiring them to price products competitively. “As the landlord, Queenstown Airport cannot set the prices for consumer goods, but we do monitor prices and compare them with pricing at competitive stores across Queenstown. We also provide customer feedback to store owners.”
He says the concession fees the airport earns are used to support the retail offering in the terminal, like investment in a new café and bar with a courtyard opening on to the airport forecourt, and an additional food and beverage outlet opening later this year in the international departure lounge.
The international airports in New Zealand’s three biggest cities are all part-owned by their respective city councils: Auckland Council has an 11 percent shareholding, Wellington City Council holds 33 percent, and Christchurch City Council holds a 75 percent share. In all three cases, there are discussions of divesting some or all of the shareholdings.
All three of those big airports publish fairly detailed financial statements. These reveal that Wellington Airport earned $54m from retail and trading activities in the past year, including $13.6m in retail concession fees and $18.9m in rentals.
Auckland Airport earned $184m last year from retail concession fees, as well as $30m from retail and aeronautical rentals.
Auckland Airport communications manager Helen Twose says retailers are obliged to ensure their pricing is fair and competitive, and Auckland Airport uses a third party to actively monitor prices against those of similar off-airport retailers or outlets at other airports, where appropriate.
“For the likes of Relay, that comparison group could include other convenience stores with long trading hours, such as petrol stations,” she explains.
As well as the long trading obligations – often 20-hour trading days – Auckland Airport also considers factors such as the increased compliance and operating cost expenses unique to the airport environment, including security, biosecurity, staffing and logistics.
The airport is earning more from retail now, but during the pandemic it provided retailers more than $230m in abatements , so they were in fit shape to resume operations when borders reopened.
Christchurch Airport earned $91m from rent and lease income, but it’s not clear how much of that was from retail. Strategic communications manger Sean Tully said pricing was a matter between the retailer and customer, but the airport maintained oversight to promote a balanced service.
Vanessa Horne says the question of whether the allocation of contracts to concourse retailers is likely to breach the restrictive trade practice provisions of the Commerce Act will depend on the particular facts of each situation.
These include the nature of the terms of the contract, the nature of competition in respect of the relevant product, and the geographic extent of the market.
“Charging a high price doesn’t in itself breach the laws we enforce,” she says. “Under the Commerce Act we would be concerned about conduct that might exclude or harm competitors or the competitive process, while the Fair Trading Act prohibits misleading and deceptive conduct, and false representations.”