The likelihood or otherwise of the Government breaking up the supermarket duopoly is the subject of two fascinating pieces of analysis.
In the most recent, Stuff business writer Tom Pullar-Strecker concludes the Government isn’t going to overrule the Commerce Commission next month and order a break-up.
He says there’s little doubt the Government would like to act tougher than the commission advised on supermarkets, “And it will push the envelope on the commission’s reform package where it can, but that will be short of ordering immediate structural reform of the industry.”
He says the Government believes it needs to at least be seen to give the commission’s measures a chance to deliver results before moving to any big next step – after the recommended 3-year review – and that means late 2026 before a possible supermarket break-up.
Meanwhile, BusinessDesk Editor Pattrick Smellie stops short of making a call, but says whatever the Government decides to do, it will be looking for options that have clear political impact, “and that is the problem for the supermarkets”.
He points to analysis by FGC member and specialist grocery consultancy Coriolis, which favoured forced divestments as the only way to break the duopoly’s power.
It one way of doing it would be that by January 2024, any food retailer with more than 27% market share in any region of New Zealand shall be forced to divest stores until they reach 27%” market share”.
Smellie asks if this could be what has caught Minister Clark’s eye when he said one of the options on the table for consideration was retail divestment.
This would not so much bust up the existing duopoly as surgically reduce its size whenever it became too dominant in any one region.
Smellie says supermarkets have been “investing heavily in appearing willing to mend their ways, racing ahead of proposed regulation with voluntary measures to stave off intervention.
“But the political mood has shifted. In a sector where there is little true customer loyalty – the commission found people shop around endlessly – the tide is going out on the supermarkets.