Bryce Edwards: Political Roundup – Supermarkets win in the end

Bryce Edwards: Political Roundup – Supermarkets win in the end

Labour went into the 2020 election promising a Commerce Commission market study into supermarkets and building supplies to ensure everyone is getting a fair deal.

However, the Commerce Commission’s final report into New Zealand’s uncompetitive supermarket sector stopped short of breaking up the supermarket duopoly to bring down the price of food. It lets the government off the hook for taking on the supermarkets and forcing transformational change to this crucial retail sector. Minister of Commerce David Clark has talked up how much the supermarkets will change their own behaviour, but ultimately this report gives the government justification to only tinker.

In contrast, the Commerce Commission’s interim report, released mid last year, was greeted with horror by the supermarkets, because it recommended bringing in significant new regulation, breaking up the duopoly, and potentially even setting up a new state-owned supermarket chain to force change.

Although that 2021 report was universally praised, and its radicalism welcomed, the Commerce Commission and Government have since done a major U-turn, shying away from anything that might significantly reduce supermarket profits. Supermarkets and their lobbyists have done a good job of convincing authorities that such a shakeup would be too difficult. And the supermarkets have made it clear to the Commerce Commission and Government that attempts to implement stronger reforms would lead to lengthy legal battles.

The consensus amongst commentators is that Labour is relieved to have a report that means that they don’t have to take on the difficult task of dismantling the supermarket duopoly or setting up a new “KiwiMarket” retail chain.

The ComCom report is useful in its diagnosis that this retail sector is uncompetitive, which is leading to seriously poor outcomes for consumers, food suppliers, and supermarket workers. Profits are shown to be about $1m a day above what they should be – twice what they would otherwise be if the market was a healthy level playing field.

This doesn’t mean that nothing will change. There are 14 recommendations in the report, and some might even lead to important improvements in the sector. In particular, banning the supermarkets from land banking and using legal means to block potential competitors from getting sites for new stores should be welcomed by those who want to see a less outrageously distorted market.

But most of the recommendations are favourable towards supermarkets and food suppliers. The status quo is to effectively continue, and the super profits – which the Commission estimates as being $430 million a year greater than they should – will continue to be accumulated as before. Unsurprisingly, owners from both the retail and food supply sectors have welcomed the Commerce Commission report and are extremely happy to have dodged a bullet. As Hamish Rutherford says in his analysis of the new report: “Supermarket owners across New Zealand are likely to be breathing a little easier”.

The outcome is much like many of the other dysfunctional markets that were promised reform by this Government: banking, petrol, and housing. In fact, financial journalist Bernard Hickey suggests that the Government’s response to the food sector is much the same as their response to the provision of housing – one in which the rich owners have once again got their way.

Hickey suggests that, yet again, state bureaucrats have been captured by vested interests, and the likelihood is that the recommended new regulator will be too. This is partly by design, he says: “Accidentally on purpose, Aotearoa has found itself held hostage by uncompetitive markets and dominant market players for two of the basics of life: food and shelter. A series of accidents of political history tied to a naive three-decade-long assumption that free markets would always provide the basics and the luxuries of life both efficiently and fairly has made our housing and groceries some of the most expensive in the world.”

If Labour lacks the courage to deal with the supermarkets, what do other parties say? The Greens are sticking with their demands for a state-owned supermarket, while National says “I think they have gone far enough for the moment”, backing Labour’s “wait and see” approach, and yet another review in three years’ time.

The big problem for Labour is that this lack of action on supermarket reform comes just when the political battle on the cost of living is seriously heating up. And so, as with housing, Labour will be accused of sitting on its hands, leaving the rich to get richer and the poor to get poorer. It’s opening itself up to the growing idea that this is a “Government of advice” rather than one that reforms, and perhaps worse than that, a “Government of bureaucrats, for the bureaucrats”.

More reading on the topic:
Bernard Hickey (Spinoff): New Zealand’s supermarket duopoly lives to profit another day
Hamish Rutherford (Herald): Final supermarket report a big backdown on profitability and response (paywalled)
Luke Malpass (Stuff): Commerce Commission’s supermarkets softly-softly makes life harder for Government
1News: Supermarket chains got ‘big fright’ from report into sector
Tom Pullar-Strecker (Stuff): No Aldi immediately, but better deals may be coming for supermarket shoppers
Ernie Newman (Stuff): Supermarkets should get the message: the guillotine is primed
Eric Crampton (Newsroom): Legalising groceries
Martyn Bradbury (Daily Blog): Commerce Commission guttlessly capitulates to Supermarket Duopoly – Labour won’t do anything
Anne Gibson (Herald): Land banking by supermarkets should be banned: Commerce Commission competition report (paywalled)
Pattrick Smellie (BusinessDesk): Big supermarket owners escape major change (paywalled)
Jean Bell (Newsroom): Food suppliers ready to ‘fight for survival’ after ComCom supermarket report (paywalled)
Hamish Cardwell (RNZ): ComCom report: Advocates upset with tame reforms mooted for grocery sector
Pattrick Smellie (BusinessDesk): Supermarket report shows limits to competition in NZ(paywalled)
John Anthony (Stuff): Art of the covenant: The tactic supermarkets have been using to ‘unduly restrict’ competition
Will Mace and Dita De Boni (NBR): Grocery challengers say ComCom report ‘weak’ (paywalled)

Other items of interest today:

RNZ: Season 2, Episode 9: Party People podcast
Party people debates the Commerce Commission’s final report on supermarkets, the winners and losers of Christopher Luxon’s planned tax cuts and the fallout over the Parliament grounds occupation.

Charlie Mitchell, Ellen O’Dwyer, Alex Lim and Felippe Rodrigues (Stuff): The Collapse of Camp Freedom
An exceptionally well documented and visual account of the last day of the parliamentary protest

Hamish Bidwell (Herald): Troubled by triumphant ending to protest (paywalled)
A journalist gives a thoughtful and dissenting view on how the media and commentators portrayed protesters at Parliament.

John Battersby (Herald): Parliament protest and critical thinking – this isn’t us, is it? (paywalled)
A lecturer in Defence and Security Studies at Massey University argues that the “righteous” attempts to assert that violence at the parliament protest was “due to foreign influences, conspiracy theories, misinformation, and of the alt-right” misses the mark.

Russell Palmer (RNZ): Three waters reforms: Working group urges government financial backing
The Government’s Three Waters working group has released its report on the way forward for the plagued programme.

Todd Niall (Stuff): Three Waters: Auckland mayor makes last stand over aspects of Govt reforms
Auckland Mayor Phil Goff is dissenting from his Three Waters working group colleagues. According to this article, “Goff opposed the co-governance model with iwi, recommended by the working party he sat on, and is against the limited say Auckland Council will have on the Upper North Island water company.

Ani O’Brien (The Platform): IWD: I’m angry at other women
Yesterday was International Women’s Day, and this writer argues it “has become a farcical parade of corporate pink-washing overlaid by a nepotistic circle-jerk of privileged & influential liberal women giving each other awards”.

Kiri Gillespie (Herald): Tauranga commission asks Local Government minister Nanaia Mahuta to delay council elections (paywalled)
The Government’s appointed commissioner for the dismissed Tauranga City Council has suggested they should continue in the role for another three years, putting off this year’s election. Some local ratepayers have vowed to start a rates-strike movement if this happens.

Daniel Dunkley (BusinessDesk): What could TVNZ-RNZ ‘merger’ mean? (paywalled)
A media commentator looks at “hints and leaks” about the Government’s upcoming announcement on public broadcasting, suggesting the Government will retain both RNZ and TVNZ brands under one overarching new organisation, with a new charter.

Herald: Record profit: NZ banks made over $6 billion in 2021, KPMG report
This report says that “Despite battling the second year of a global pandemic banks operating in New Zealand collectively made more than $6 billion in 2021”.

Martyn Bradbury (Daily Blog): Roy Morgan Poll – National/ACT 49.5% Labour/Green 43%
The Latest Roy Morgan poll has some surprising results, which Martyn Bradbury says should be sobering news for the Left.

Andrew Dickens (Newstalk ZB): Is there a cost-of-living crisis?
The Prime Minister says there is no cost of living crisis, and the Greens’ Chloe Swarbrick preferred to call it an “inequality crisis”. Whatever it’s called, some think it’s the Government’s “Achilles heel”.

Josh Van Veen (1/200): The Myth of a Self-Made Man
Is Christopher Luxon the New John Key? Josh Van Veen, a scholar of political leadership, examines what the new National leader represents.

Peter Dunne: The right to vote is absolute
Former Cabinet Minister Peter Dunne argues for the return of voting rights to New Zealanders living overseas who have been shut out by Covid.