Commerce Minister David Clark has announced more detailed proposals for a single Grocery Commissioner to regulate the supermarkets duopoly of Foodstuffs and Countdown (Woolworths) from within the Commerce Commission, similar to the way the Telecommunications Commissioner enabled the breakup of the Telecom-Vodafone duopoly earlier in the 2000s and the arrival of 2 Degrees and many broadband competitors.
Clark highlighted the success of that anti-monopoly regulator in creating much greater competition and lower prices for consumers in broadband and mobile telecommunications. The period after the break up of Telecom into Spark and Chorus, along with the arrival of 2 Degrees, mobile number portability and termination rate regulation, has been described within the Reserve Bank as the '2 Degrees effect,' referring to the depressing effect on inflation of various regulatory and pro-competitive moves.
Clark has repeatedly referred to the $1 million in excess profits made each day by the duopoly, as measured by the Commerce Commission in its market study of the sector earlier this year. He acknowledged differences between groceries and telcos, but said the telecommunications role set a good benchmark and model.
Clark made the announcement from the headquarters of Consumer NZ, the independent consumer advocacy and watchdog organisation. Key details of the proposed Grocery Commissioner include:
- The Commissioner will be based inside the Commerce Commission and produce annual ‘state-of-competition’ reviews; and,
- The legislation governing the Commissioner’s role will be introduced to Parliament later this year; and,
- the person will be appointed after the Bill is passed.
“The Grocery Commissioner will be a referee of the sector, keeping the supermarket duopoly honest and blowing the whistle where it suspects there is a problem,” Clark said.
“They will maintain a close eye on how Government’s reforms for the sector are implemented and ensure Kiwis are getting a fair deal at the checkout,” he said.
“By placing this role in the Commerce Commission it will have access to a wealth of information when it comes to economic and competition regulation, fair trading, consumer protection and the grocery sector itself.”
Mandatory code of conduct
Clark also announced the launch of a five-week consultation process for a mandatory code of conduct between major grocery retailers and suppliers, which he said was to ensure suppliers got a ‘fair deal’.
“Historically, there has been an imbalance in the bargaining power major grocery retailers have over their suppliers,” Clark said.
“The Grocery Code of Conduct will address this by preventing the major retailers from using their power to push costs and risks onto those suppliers. It will ensure that this relationship is conducted fairly,” he said.
The discussion paper for the consultation said the code could either be principles based, as was seen in the UK where the code is mandatory, or be more prescriptive, as was the case in Australia where the code is voluntary. A third blended option could also be used.
The paper also refers to the use of either the ‘fair dealing’ or the ‘good faith’ approaches being considered. Suppliers are seen preferring the 'good faith' standard, so Clark's use of the phrase in his news release is notable.
Initial reaction
Consumer NZ CEO Jon Duffy said he was impressed at the speed with which the Government was moving.
“This sends a clear message to the supermarkets: they cannot keep making super profits at the expense of struggling consumers,” Duffy said.
“That said, the devil is in the detail – the Grocery Industry Competition Bill will set the powers of the regulator, and the mandatory code of conduct will set the rules for fair play between supermarket industry participants.”
The moves are the latest from Clark focused on supermarkets, including legislation passed last week to ban supermarkets from including clauses in shopping centre leases and covenants on land parcels that blocked competitors from using them, even after a member of the duopoly left the centre.
The push is also part of the Government’s attempts to deflect blame from the Opposition for inflation rising sharply this year, particularly for food, energy, transport and housing.
Clark reaffirmed the Government was on track to propose a mandatory wholesale access regime for groceries later this year and continued to work on back-stop options for a break-up of the sector.
ACT Deputy Leader Brooke van Velden said domestic inflation was fuelled by rampant Government spending and she referred to a measure from the Commerce Commission that excess profits were $86 per person per year, whereas food prices had risen $282 per person per year.
Van Velden said ACT would repeal the Resource Management Act to make it easier to build new supermarkets and exempt OECD members from the Overseas Investment Act to encourage foreign investment in the sector.
45 Comments
How did the duopoly get away with this for all those years? Everyone knew they were manipulating suppliers, putting covenants on land, etc. I remember the Warehouse tried to become a supermarket and the big brands wouldn't supply to them due to pressure from the duo so they quit.
Because once the Commerce Commission got their big "win" over Telecom, Governments assumed they were an autonomous dept requiring little to no oversight. Their spending has increased from $40m in 2017 to $60m in 2021 so they could run webinars for businesses on what "cartel conduct" is.
"In November 2020 the Government directed us to conduct a market study into any factors that may affect competition for the supply or acquisition of groceries by retailers in Aotearoa New Zealand."
Why does the Government need to direct them? Surely keeping an eye on anti-competitive factors is a daily task for the CC?
https://comcom.govt.nz/__data/assets/pdf_file/0033/277476/Commerce-Comm…
too be replace by who? 7-houses-luxon?
Our world wont be that different with a govt change, expect higher house prices, more low skilled immigration and even more duo/monopolies...
Neither party has any form of long term view or cares much about the quality of life of the low to mid classes. Their lobbyists/sponsors are large business, Real Estate, Developer and the wealthy.
I am not sure it was ever that different, just seems more obvious now
In addition, they are only proposing policy to make things worse for NZ society, so far. Which doesn't seem very useful.
Voting for bad policies because the party figurehead has "business experience" doesn't seem particularly well thought out. I will likely be voting for a smaller party of some stripe.
I’d argue his equity in 7 houses is only part of his net worth and he is more vested in shares/bonds and retirement pensions from previous employers. But hey, not fit for purpose as he owns rentals…..is white….is male….is bald….is privileged. Poor bastard can’t win. Thank Christ we’ve got a fish n chip powerhouse in charge.
Cindy joined the Labour party at age 17. She's a career politician.
https://en.wikipedia.org/wiki/Jacinda_Ardern
Luxon left Uni at 22. Climbed the corporate ladder.
https://en.wikipedia.org/wiki/Christopher_Luxon
Easily dealt with. Luxon just has to announce that if he is elected he will sell his assets and place the proceeds in a blind trust so that there can be no allegations of corruption or suspicion he is promoting his own portfolio.
I don't think most people are upset he is successful, but when his portfolio places his interests against those of the majority of New Zealanders, that is a problem. He is only human and of course his thinking will be influenced by his assets, if he knows what they are.
Why do I get the feeling that David Clark saying "on your bike" to the supermarket duopoly won't achieve much? (and to be fair, getting on his bike didn't do him any good either).
Imagine how cushy a number being the Grocery Commissioner will be ... get paid heaps to have absolutely zero impact. Easy money, free money.
I don’t suppose he remembers, learning at school if he did, what happens when you put your thumb on mercury. This is just a futile showcase that has no teeth. By the time you gather the data, have the bureaucracy collate it, all will have moved on, circumstances of supply and demand are as fickle as you might want them to be. The supermarkets are laps ahead in intelligence. Under what law are you then going to actually hold their feet to the fire, because up until now there has been nothing to harness their operation. This will just be a repeat of the petrol enquiry that achieved zilch.
Under what law are you then going to actually hold their feet to the fire, because up until now there has been nothing to harness their operation.
Commerce (Criminalisation of Cartels) Amendment Act 2019
https://www.legislation.govt.nz/act/public/2019/0009/latest/whole.html
Yes. Well if the Commerce Commission have had such definitive power why haven’t they resorted to it before now. Bearing in mind the nature of the duopoly has actually arrived & flourished under their watch. Remember a great enquiry in the 90s into stock procurement, manipulating the schedule, by the meat processors which went nowhere because they had no dough to pay the fine(s) or if they did they would have gone broke. And similar about twenty years ago into the cardboard carton manufacturers that fizzled out as that activity itself was easy enough to obfuscate. Those enquiries took years & years to compile sufficient data to build a case. Time and a few good silks will send any case backwards and forwards for years to come. That ain’t going to soon solve a problem here that has been so well embedded for so long.
Yes. Well if the Commerce Commission have had such definitive power why haven’t they resorted to it before now.
The Commerce Commission are lazy waste of taxpayer expense. They had power when people were complaining about $0.20 text messages and 10 gigabyte broadband data caps.
"In November 2020 the Government directed us to conduct a market study into any factors that may affect competition for the supply or acquisition of groceries by retailers in Aotearoa New Zealand."
Why did the Government need to direct them to perform a basic task that would fall under a body there to oversee anti-competitive behavior?
https://comcom.govt.nz/__data/assets/pdf_file/0033/277476/Commerce-Comm…
does this 25 cent tax rebate apply to
- 1 litre of milk?
- 3 litres of milk?
- 500ml of milk?
- chocolate milk?
- a2 milk?
- cream?
- soured milk?
- cultured mlik?
- goats milk?
- powdered milk?
- condensed mlik?
- butter milk?
- raw milk?
- soy milk?
- almond milk?
- oat milk?
- rice milk?
- hemp seed milk?
- barrista milk?
- baby formula?
GBH,
I owe you an apology. Last week i called you an idiot and I had no right to do that. I can only plead in mitigation that I feel very strongly about tax avoidance, partly because I was involved in that market in the mid to late 70s. I take no pride now in the fact that I actively helped already wealthy people avoid large amounts of CGT on the sales of businesses. These schemes involved multiple steps, each one legal in itself, but leading to a totally artificial end result.
I am not against people becoming wealthy through building up successful companies like Mainfreight. What i am dead against is using tax lawyers and accountants to artificially avoid tax. Look at the revelations in the Panama and Pandora Papers and read books such as Treasure Islands to get an idea of just how widespread avoidance is.
ACT are clueless about how our financial system operates if they think that it is government spending which is creating our inflation and they would just inflict damaging austerity upon us with this thinking. There is no recognition from them at all that it is the commercial banks which create the majority of our money.
It's probably true to some extent given how high as a portion of GDP our government spend is in NZ vs. how we're getting less and less from it with each passing day, but it's patently absurd to pretend it's because of Light Rail or other projects which never moved beyond a business case. It does however let you create a 'reckless spend' narrative (which is true anyway) and use it to attack obvious fumbles.
And yes, using government spend as a portion of GDP is a better way of gauging the size of government-driven inflation, especially if the government is taxing inflation-driven components of earnings and we can't even man hospitals as a result. But that involves thinking critically about how big the government spend-up would have to be for it to effectively do all the things it pretends it does/denies it doesn't do, and the effect of stripping that much again out of the economy in discretionary spending.
But Clark is equally as clueless.
This is a global food/energy/population problem. Actually, because one calorie of food represents many burbed calories of finite fossil fuel, we can KNOW that food is too cheap.
Its cost should represent whatever it takes to not draw down resources; soil, aquifer levels, water quality, phosphate, oil (F/B process).
We have no idea what that would be, but the just-in-time food system wouldn't be part of the mix. Nor would Real Estate - they'd be too bust producing food.....
Van Velden said ACT would repeal the Resource Management Act to make it easier to build new supermarkets and exempt OECD members from the Overseas Investment Act to encourage foreign investment in the sector.
Also, someone needs to tell them the government plans to repeal the RMA and ask them why they propose to exempt only OECD countries from the Overseas Investment Act?
If the Grocery Commissioner and what he/she says is as much ignored by the government as they ignore the Retirements Commissioner's input, then one can only look forward to even more bureaucrats and expenses for the tax payer. They create so many roles with no teeth. I suspect soon we will have a Ministry for Groceries.
BTW, when I ask these commissioners and ministers questions, almost always will they refer to someone else until all goes round in circles without any answers. Clever tactics, but not working.
Health Minister David Clark 2020 refused when the Warehouse tried to keep their grocery capable stores open during Covid19 lockdowns as an essential grocery provider. It was required that ordinary NZ shop at the duopoly.
David Clark Commerce Minister 2022 is shocked that the duopoly is so dominant in NZ and acts like a protected industry.
David Clark may be a colossal and total...
HTP,
Exactly.
How many SME's, collectively providing some competition, were bankrupt by labours mamdatory lockdown.
When you purposefully destroy businesses at the expense of a duopoly then complain that your being ripped off, this is your clan:
Muppets, muppets, muppets
"...has been described within the Reserve Bank as the '2 Degrees effect,' referring to the depressing effect on inflation of various regulatory and pro-competitive moves..."
Aka the 'Gull effect' aka the 'Basic economic theory of introducing a competitor in a homogeneous supply side effect'.
The trouble is, supermarkets are not homogeneous so it won't necessarily work as desired. They have a lot of different products and can loss-lead / cross-subsidise to their heart's content. The only way to crack this is to separate the wholesale from the retail market.
On top of that, unless you have an energetic and activist responsible Minister - and for all his faults, Cunliffe was certainly one of those when dealing with Telecom, but Clark most certainly isn't - the CC demonstrably defaults to political expediency and effective industry capture.
Consumer NZ CEO is impressed with this government's speed in pushing this new GROCOM concept?
"Inspirational" measures and catchy slogans are one thing. Detailed implementation will be quite another. Office space to lease; CEO & staff to appoint; consultants engaged to design the logo and draft a mission statement; focus groups to organize. Will co- governance be the way to go? (I am sure tangata whenua have been disproportionately affected by high grocery prices) Are there any Mahuta whanau left to head this up?
But jokes aside, what is the Conmerce Commision there for, if not to prevent cartels and ensure competition is not unduly excluded?
Looking back over the history of Labour governments, one must acknowledge their idealism and being every ready to go into bat for the ordinary bloke. But one also needs to acknowledge their failure to appreciate that government regulation is inevitably a blunt instrument and that their readiness to pass more law almost always produce unforeseen costs and disadvantages.
Small countries or communities often suffer from lack of choice, & often we don't help ourselves. For example there are a few excellent NZ owned banks, but most Kiwis bank with the bigger Aussie banks. There are lots of excellent small traders but most Kiwis shop at the big boxes...often foreign owned.
Sigh! We seem to think passing yet more laws is an answer, despite evidence of many decades that more law equals more bureaucracy, more Nannie State but few benefits at ground level.
GROCOM sounds like some form of crypto-Soviet 5-year planning propaganda organ.
I can see the press releases now:
"GROCOM heroically reduces the price of New Zealand's favourite wholesome breakfast product by 9c per box over 2 years, with consumer satisfaction on track to meet year 5 projections set by the Central Committee.
The proletariat spontaneously rejoice at being liberated from the yoke of the duopoly Oligarchs by feasting on dry Weetbix and praising the Minister, tears streaming down their rosy cheeks."
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