Monopolies watchdog warns Government: 'Capitalism needs to be saved, not tinkered with'.

Monday, 17 February 2025

Last year, anti-monopolist Tex Edwards urged MPs to ensure disruptive fintechs get the capital they needed to launch neo-banks, which are growing in power in other countries including the UK and Australia.

“Capitalism needs to be saved, not tinkered with,” Tex Edwards from the monopolies watchdog group, Monopoly Watch, has told the Government.

Edwards’ warning comes in his submission on a major review of competition law ordered by the Government.

Last week, Finance Minister Nicola Willis said: “I see vested interests winning, and I see everyday Kiwis missing out”, telling economists at a conference in Hamilton that she was ready to support a new supermarket entering the New Zealand market.

In his submission to the competition review Edwards, founder of telecoms company 2degrees, called for a fundamental rethink of both the Commerce Act and the replacement of the Commerce Commission with a new body with more teeth, and a “fixing broken markets” division.

There needed to be laws allowing for a business to be declared to have “significant market power”, and remedies that counter it.

Mistakes over the last 25 years had led to incredibly concentrated markets in sectors like banking, supermarkets, electricity, fuel, and telecoms, he said.

Those failures had led to New Zealand households paying too much for goods and services, and was undermining trust in capitalism, he said.

“A fundamental intergenerational distrust is emerging and fracturing social cohesion; privileged monopoly and oligopoly structures perpetuate inequality and squash innovation,” Edwards said.

“Tinkering and minor incremental reform will play into the hands of nasty oligopolists.”

Edwards blamed US influence for the philosophical underpinning to the decisions that had led New Zealand into allowing oligopolies to emerge, but he also had harsh words for the power large companies have through paid lobbyists influencing political decision-making.

He said the Government should order the Ministry of Business, Innovation and Employment to review the operations of industry lobby groups and professional associations, which he said become “toys of the dominant players”.

The Commerce Commission is New Zealand’s competition watchdog, but Monopoly Watch says it, and competition law, must be completely overhauled.

He feared the development of artificial intelligence would give more power to the country’s largest companies to further dominate commercial life.

Edwards said the current merger regime had not served consumers well.

It had allowed mergers and acquisitions that should not have gone ahead, and it lacked powers to determine “critical” industries where competition was lacking, and tackle them with enhanced powers like forcing the splitting of some large companies, he said.

Edwards himself has called for the country’s largest bank ANZ, which was allowed to buy National Bank in 2003, to be broken up.

Even where there had been long-standing calls for action, there had been no action. He gave the example of calls to force banks to sell their stakes in Payments NZ, which runs the payments system. It has been accused of being one of the reasons why New Zealand has been so slow to develop competition-enhancing open banking.

“The failure to force the divestment of Payments NZ to a third party, in particular, has stalled investor appetite,” he said.

One of the biggest failures in New Zealand competition was allowing for “creeping” acquisitions, where big companies are allowed to buy a series of small companies, he said.

He gave TradeMe as an example. “Incremental acquisitions have led to unassailable market power and the exploitation of network effects.”

Tex Edwards from Monopoly Watch says US economic influence has led New Zealand in the wrong direction on competition policy.

While Edwards wanted the Commerce Commission replaced, he praised its staff.

“The current ComCom organisation has a reformist, talented and hard-working professional team, however, they don’t have the power or the legal mandate,” he said.

Edwards urged politicians in New Zealand not to look to the US and Australia for examples of good competition law, and instead look to Europe.

“Small countries are fundamentally different from large countries; mining is fundamentally different from agriculture and tourism,” Edwards said.

“Australia has well-funded state-based consumer advocacy groups; New Zealand doesn’t have them, so we need to have a different competition framework. Importantly, Australia themselves have struggled with competition.

“For example, in the 20 years that Aldi has been in Australia, they have failed to reach scale and done no more than collaborate with their competitors.”