Supermarket duopoly looks safe after minister indicates he won't overrule ComCom

Wednesday, 30 March 2022

Commerce Commission chairwoman Anna Rawlings and commissioner John Small insist proposed supermarket industry reforms will make a difference, even though they are making no promises they will lead to a third entrant.

The Green Party has made a fresh call for the Government to override advice provided by the competition watchdog and break-up the country’s supermarket duopoly.

But that may be a losing battle after Commerce Minister David Clark appeared to confirm in Parliament on Tuesday such a move was not on the immediate horizon.

The Commerce Commission decided against recommending that Countdown and Foodstuffs should be forced to sell some of their stores to help make way for a third supermarket group when it completed a $3 million market study into the $22b groceries industry earlier this month.

The commission estimated the two supermarket groups were making a total of $430m a year in excess profits, but settled for recommending lesser measures to improve competition.

* First fuel, now food: is our competition watchdog letting us down?

* $430 million a year in excess profits but no supermarket split

Chairwoman Anna Rawlings said that a forced split of the supermarket duopoly would be complex and unprecedented internationally.

Green Party commerce spokesman Ricardo Menendez March said there were “two very clear opportunities to make it possible for every family to afford the food they need”.

“Step one: immediately increase benefits to liveable levels. Step two: break up the supermarket duopoly.”

David Clark’s comments suggest the Government will enact the measures recommended by the Commerce Commission and see if they have any impact before considering whether to go further.

Speaking in Parliament on Tuesday, Clark said there was a need to improve competition in the industry and officials were still studying the commission’s recommendations.

Those include a mandatory code of conduct for the two chains that would govern their dealings with suppliers and a ban on restrictive land covenants.

There had been some speculation the Government might press ahead with a supermarket split despite the commission’s reticence.

But Clark appeared to make clear that the Government would only consider that after implementing and assessing the impact of the reforms that the commission had recommended.

“We have accepted the findings from the Commerce Commission,” Clark said.

“I have been clear that we will not rule out exploring further measures if the recommendations in the report don't achieve the level of competition we need.”

The Commerce Commission received a break on Wednesday from one unlikely source over its decision not to recommend major structural reforms of the industry.

Competition advocate and 2degrees founder Tex Edwards had called for the commission to recommend forcing Countdown and Foodstuffs to sell at least 150 of their stores to make way for a third competitor, during its market study.

But he said on Wednesday that he thought that was always a “20-to-1 long shot” and he believed the commission was playing a long game.

The commission was taking “a pragmatic, strategic approach” by not attempting to engage in a pitched battle that it did not have the resources or political support to win, Edwards said in a statement issued by Monopoly Watch NZ.

“Monopoly Watch NZ has studied the entrails of the Commerce Commission’s final report on the market study into the grocery sector and thinks its approach to improving competition in supermarkets is more strategic than it is being given credit for,” Edwards said.

Despite those conciliatory comments, Edwards said he was still “disheartened” there had been no recommendation to break-up Countdown and Foodstuffs and continued to take issue with several of the commission’s conclusions.

The industry reforms that the commission had proposed would only benefit some suppliers and “luxury-end fringe players”, leaving poorer Kiwis “who don’t have private jets and Perini Navi yachts exposed to more expensive food outcomes”, Edwards said.

Disappointment with the outcome of the groceries market study has led to calls from Māori for the Commerce Commission itself to be reformed.

National Māori Authority chairman Matthew Tukaki called on Tuesday for Māori to be given the right to appoint a commissioner to the watchdog to ensure it is able to view issues “through a Māori lens”