Neil Sands
National says it will break up the supermarket duopoly by forcing Foodstuffs to split into two competing grocery chains, one comprising PAK’n’SAVE and the other New World/4 Square.
“After years of reviews and incremental reform, it’s clear the status quo isn’t working. It’s time for change,” National finance spokeswoman Nicola Willis said. “New Zealanders deserve a better deal at the checkout. National is campaigning to make that a reality.”
“Separation would create three major nationwide grocery chains [with Woolworths] and put more pressure on supermarkets to win and keep customers.”
The election pledge, which marks a major departure from National’s free-market principles, would be subject to an independent assessment by the Commerce Commission to ensure it would actually benefit customers.
“Structural separation of this scale has risks and must be done carefully. Whether a separation would deliver net benefits for consumers would depend on how it is implemented and what happens to supply-chain costs.
“That is why National will not have politicians playing supermarket executive from the Cabinet table, whether by ordering a breakup themselves or spending billions of taxpayer dollars trying to run a supermarket.
“The Commerce Commission has the independent expertise to test whether the benefits for shoppers outweigh the costs and to work through how any separation would operate in practice.
“There is a very high bar for this kind of intervention and National is not pursuing structural separation in any other sector. This will be a supermarket-specific process under the Grocery Industry Competition Act.”
The big grocery chains continue to dominate 80% for the $25 billion grocery sector, despite government attempts to boost competition to provide customer relief amid the cost of living crisis.
The changes include tweaking planning rules to fast-track supermarket developments, preventing “land banking” of supermarket sites, cracking down on misleading promotions, and trying to attract a third player, such as Costco or Aldi, without success.
Willis said independent analysis estimated restructuring Foodstuffs could save households $200-$1,320 a year. She said the experts believed grocery prices would fall 3.5% from their current track after one year of separation, rising to 5% after six years.
Labour’s price gouging solution
Labour said it would ease cost-of-living pressures by introducing legislation to prevent price gouging by big companies on basics such as food and fuel.
“Labour’s policy will ensure that companies with significant market power are charging a fair price for the things that your family can’t do without,” the party’s commerce and consumer affairs spokeswoman Arena Williams said.
“This is aimed at a small number of very large companies. It won’t touch the 97% of New Zealand businesses that are small, like your local dairy or cafe.
“It also applies only in markets for essentials, like food, power, fuel, transport, telecommunications banking and insurance.
She said Labour will:
- Make it illegal for big companies with substantial market power to charge excessive prices for essential goods and services, or to pay unfairly low prices to suppliers;
- Set a clear legal test for price gouging, which is when prices are well above what they would otherwise be in a competitive market, sustained over time;
- Give the Commerce Commission the power to investigate pricing; and
- Require companies that gouge to pay penalties and hand back excess profits.
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