A late pitch for supermarket competition

Labour says they want more competition in grocery retail. I worry about the cursed monkey paw version of it.

Here's what they say:

“We know that it’s tough right now for many people, and the high cost of food isn’t helping,” Commerce and Consumer Affairs spokesperson Duncan Webb said.

“The inquiry we ordered into competition in the grocery business showed the two big companies who control the grocery industry in New Zealand were making excess profits of around $1 million a day.

“We need to go further than we have to date to force the type of competition shoppers overseas experience.

“If we’re returned to Government, Labour will back credible companies wanting to get into or expand into the New Zealand grocery business.

“This could include finance, making sure land is available, regulatory changes, incubating innovation and accelerating competition.

First, backing companies is a mistake. The government shouldn't be picking who the next grocery retailer might be. 

Next, subsidising entrants would also be a mistake. If you have everything else set right, the potential entrant's decision about whether to enter tells you something really important about viability. But if a subsidy's needed to get them over the line, it's a lot harder to tell whether that entry really made sense in the first place. And you're setting the stage for future subsidy-seeking. 

I don't know what incubating innovation means and I'm not sure they do either. It feels like something that Rhonda from Australian TV series Utopia might have thrown into the mix because it sounded good. 

But making sure land is available and that regulation isn't in the way strikes at the root of the current problem. 

When we'd looked at it during the Commerce Commission market studies process, it seemed that it was de facto illegal for a new entrant to come into the market at scale. Too few sites zoned for large footprint retail; long and variable lags in consenting that introduce huge risk; uncertainty about whether police and medical officers of health would block liquor permits late in the game; hurdles through the Overseas Investment Office for any sensitive sites. 

And Labour added an additional problem when it set the new grocery regulation regime. Five years after Aldi, or anyone else, started up as a grocery business in New Zealand, the Minister could designate them if the Minister figured it was a good idea. A designated grocer is compelled to supply its competitors at government-regulated prices. 

So if Aldi, or Lidl, or Tesco, or anyone else came here, they might worry that:

1. Councils often seem owned by corrupt cartels of downtown landowners who block new competitors entry. Look at what Ashburton did. 
2. Even a council acting properly could take years to decide on consents. Your capital is tied up during that process and your logistics turn into a mess. The Natural and Built Environment Act prohibits consideration of competition, even the benefits of competition, in deciding this stuff. It's insane. We pointed out the problem at Select Committee and it wasn't fixed. And you might be stuck opening with chains across your liquor section if the police and medicos decide to cause problems, and they're likely to object. They like objecting. 
3. After an entrant has sunk massive amounts of money into establishing a presence here, that entrant could be forced to provide existing NZ supermarkets with everything from their hard-built global supply chains at prices set by the government. 

Fixing that mess would make sure land is available, would progress needed regulatory changes, and would accelerate competition. It would be super. 

But decent odds they're instead just thinking about subsidising Supie. 

We put up a release on it yesterday; I had an early morning chat with Newstalk ZB, TV3's AM Show, and Sean Plunkett at The Platform about it.