Source: BusinessNZ
BusinessNZ is alarmed at National’s proposal to pursue the separation of supermarket chain Foodstuffs.
“New Zealand has long benefited from a reputation for regulatory stability, respect for property rights and predictable policy settings. Measures of this nature risk undermining that reputation at a time when New Zealand needs investment, productivity growth and economic confidence,” said BusinessNZ Director of Advocacy Catherine Beard.
“This is a very concerning move by the National Party and sends a chilling signal to businesses across New Zealand that the Government can break up businesses. It also sends the wrong signal to foreign investors looking to invest in New Zealand.
“We consider this to be in the same league as Labour’s ban on oil and gas exploration and New Zealand First’s promise to split up the gentailers.
Ms Beard said any proposal to structurally separate Foodstuffs would require rigorous scrutiny of its unintended consequences.
“Increasing competition in New Zealand’s grocery sector is a worthwhile goal, but structural intervention of this scale raises significant questions about whether it would actually deliver lower prices for consumers.
“BusinessNZ is strongly pro-competition and supports measures that genuinely improve choice and put downward pressure on prices. But we remain unconvinced that structural separation is the best way to achieve those goals.
“Supermarkets have faced intense scrutiny due to the political narrative that the cost-of-living crisis stems from a lack of competition arising from the dominance of two major supermarket chains.
“But when we compare a basket of goods from New Zealand supermarkets with international prices, the Commerce Commission itself acknowledges that such comparisons do not take into account the fact that all food purchased in New Zealand has 15% GST applied, whereas comparator countries including the United Kingdom, Australia, Canada and Ireland do not apply GST or VAT to many food items.
“Breaking businesses apart does not automatically create more competition, and it certainly does not guarantee cheaper groceries.
“Supermarkets rely heavily on scale across purchasing, distribution, logistics, technology and other infrastructure. If structural separation reduces those efficiencies or duplicates costs, there is a risk that some of those costs ultimately find their way to consumers.
“Competition is not determined solely by market structure. New Zealand’s small population and dispersed geography present challenges that larger countries do not face. Where there is greater scale, such as in Auckland, competition is already stronger because a larger customer base can support more competitors.
“The grocery sector has already been subject to extensive regulatory intervention, including the Commerce Commission market study, the establishment of the Grocery Commissioner, a regulated wholesale regime and the Grocery Supply Code.
“The Commerce Commission’s own reporting shows a more complicated picture than the suggestion that nothing has changed.
“It identified some movement in margins and market share, while Woolworths New Zealand’s profitability has fallen substantially in recent years. The Commission’s latest annual report also says regulatory changes are beginning to bed in and that the environment is becoming more conducive to new grocery retailers entering and expanding.”
The BusinessNZ Network including BusinessNZ, EMA, Business Central and Business South, represents and provides services to thousands of businesses, small and large, throughout New Zealand.