Tex Edwards: MonopolyWatch research director on the Government's new plan to boost supermarket competition

There's hopes a fresh call for reform to break our supermarket duopoly brings meaningful action.

Economic Growth and Finance Minister Nicola Willis has announced a new strategy for creating more competition.

The Government is receptive to cracking down on pricing - and helping new entrants access land and properties.

MonopolyWatch research director Tex Edwards says the devil will be in the details.

"Because there's been an overbuild - unless it's a breakup, you're not going to get what we call price competition and you're not going to get to see any sustainability competition."

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Episode Transcript

Speaker 1 (00:00):
So a twenty five billion dollar market and just two
players control eighty two percent of it. We're talking about
the supermarket sector. Finance Minister Nicholas and Nicola Willis today
reiterated her plans to encourage a third player and more
competition in the grocery sector, but she's a bit light
on the detail. She said she'd like to remove regulations
that discourage you supermarkets, and she would like to help

(00:23):
new entrants access land in a bid to break the
current duopoly.

Speaker 2 (00:27):
Look, I am aware that we have received what's called
an unsolicited proposal. We've said to all comers, if you
want to come and invest in important infrastructure, bring us
a proposal. And I've been informed that we have had
a proposal. So what that tells me is there is
some interest, and I'm sending a very clear message today

(00:49):
that we should be engaging with that interest. We as
a government want to take those proposals very seriously.

Speaker 1 (00:55):
So Tex Edwards used to run two degrees, he's now
the monopoly what research director and he joins you now
Helo techs Hi, Andrew, I'm good. No concrete commitments given today.
Everyone says that no one, no one ever makes a
concrete commitment. They talk about the problem, never a solution.

Speaker 3 (01:15):
Yeah, I think everybody can be encouraged that you've got
ministerial focus on this. The debate and the public policy
debate of breaking up the supermarkets is quickly moving on.
I think I was personally encouraged by the minister's invitation
to listen to proposals. The gorilla in the public policy

(01:38):
room is a breakup of the incumbents. The Commist Commission
proved that there was an overbuild or supermarkets, and on
a square meterage basis, New Zealand has an overbuild of supermarkets.
This is called a barrier to entry and the sheer
level of scale that you need to create a price

(02:00):
output consumers means that you need some type of breakup
and it looks like the ministers inviting people and to
discuss how that breakup would occur with today's announcement.

Speaker 1 (02:13):
Yes, but her main thing was that she's had an
unsolicited proposal from a possible third party player. Do you
believe that could happen? Because we all know the difficulties,
the supply chain difficulties and the difficulties in finding somewhere
to put up a supermarket. Do you believe there really
is a concrete, unsolicited proposal on the table.

Speaker 3 (02:33):
Several people have been looking at this industry, including ourselves
and our British private equity people wouldn't believe, didn't believe
that the New Zealand government would ever allow a three
to two merger to take place in two thousand and six.
That's the gorilla that created this problem. And there are
unsolicited discussions of what a third would look like. But

(02:56):
it's all what economists. Economists call this peric competition, which
they really mean to say pretend competition, and remember there's
there's such laser focus on the two encartments. They would
love a small four percent market share, five percent market
share perric player, pretend competitive that come with a handful

(03:18):
of stalls. But I think that the public policy debate,
the debate has moved on since then, and I think
what the public, the common sense denominated the public and
the common sense tests here, is actually winning is that
you need a break up at the cartel. And our
research showed Andrew that you needed at least one hundred

(03:40):
and forty stores, and you needed control of your own
distribution for warehouse system. And so because there's been an
over build. Unless it's a breakup, you're not going to
get what we call price competition, and you're not going
to see nutrition competition or sustainability competition. And it's it's

(04:02):
the devil is absolutely in the detail. And anybody's experienced
in breaking up cartels knows that it's it's problematic and dangerous.

Speaker 1 (04:11):
Really capable, and it is a very big ask indeed.
But I thank you for your thoughts. That's monopoly watched
research director Text Edwards or news Talks be.

Speaker 3 (04:17):
It for more from Hither Duplessy Allen Drive.

Speaker 2 (04:20):
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