National's Supermarket Shake-Up Plan Sparks Criticism

The New Zealand grocery retail and wholesale sector is at the center of a heated debate ahead of the upcoming election. The main opposition party, National, has proposed breaking up the duopoly held by Foodstuffs and Woolworths, which was initially approved by the Commerce Commission (ComCom) 25 years ago.

The ComCom facilitated the duopoly when it approved the acquisition of Woolworths New Zealand by Progressive Enterprises in 1996. The merger was later cleared by the Judicial Committee of the Privy Council, but the ComCom declined a subsequent application to merge Foodstuffs North Island and South Island due to concerns about concentration of power.

Now, National wants Foodstuffs to merge its wholesale operations to service separate chains of Pak 'n Save and New World/Four Square. The proposal is seen as ironic given that the ComCom operates within the same organization as the Grocery Commissioner, who was established to oversee market behavior and regulate grocery retailers.

The main problem in New Zealand may not be that supermarkets charge too much, but that some people on low incomes earn too little. Instead of blaming and threatening a well-run part of the economy, inspired by a media frenzy, the next government should develop policies that encourage better performance and productivity.