Thursday 4 November 2021

Even worse than I'd thought

It just seems incomprehensible that the Commerce Commission spent two whole weeks in hearings on grocery competition, without zoning really coming up.

I'd not seen this when it came out. Yesterday, I was searching for the average footprint of a supermarket. Some OIO rules on sensitive land trigger if you're buying 0.2 hectares and some trigger at 0.4. 

So, Googling around, I found this, which noted the proposed construction of a 2787 square meter New World supermarket. 

Good, I had a number. 

Then I looked at the rest of the document. 

It's a 39-page report by Property Economics. They were commissioned by New World to produce a "Retail Impact Assessment" for a proposed New World on Dominion Road, March 2021.

This application was for one of the Covid fast-track consenting processes. New World presumably could have chosen the normal council consenting route, which means that the normal route is more restrictive than what we can infer from this piece of work.

The Report seeks to prove that a new supermarket would be very good for the neighbourhood. It does show by demonstrating that there is so much excess demand for retail grocery in the area that the supermarket could not have more than minor adverse effects on existing grocery retail. 

It argues that:

  • the supermarket should be seen as an extension of a Dominion Road local centre, rather than being in direct competition with existing centres [clearly they expect the planners to see competition as bad]
  • that neighbourhood demographics would support an additional 2-3 supermarkets by 2038, and that "demand for supermarket retail significantly outweighs supply... the market is unlikely to come to the point where a new supermarket is no longer viable." [If a new grocer could only earn customers by attracting them away from another, to the detriment of the other, that would presumably be viewed as bad by the planners - or at least the consultants believe that that is how the planners would decide]
  • that the new centre would not impose adverse retail impacts on St Lukes, Mt Eden, and Balmoral Centres [presumably a new centre that were a lot better than existing ones and drew customers away would be seen as a bad thing by planners]
  • that the new centre would not cause "retail distribution effects". What are those? Remember the old Discount Brands litigation. That stuff is still affecting things. The Courts decided that while the RMA shouldn't consider the harms a competitor imposes on another competitor, it should consider the effect on surrounding amenities. Basically, if your new centre draws people away from an existing one, then consenting should stop you not because of the effects on your competitor, but because your competitor's picnic area in the courtyard might not be as nice any more. Basically, if the effect is "significant", then Council can block you. But isn't one of the points of competition to have significant effects, or at least the potential for them?  
    • Just listen to this, with an antitrust set of headphones on. "In Property Economics view, having undertaken the requisite analysis, there is little to no propensity for this New World to cause any additional trade competition effects that would flow over into significant retail distribution effects in the context of the CRA." In other words, if the new shop were too strong a competitor, that would be bad for the consent application's likelihood of success.
So to get the consent, New World had to commission a 39 page economic impact report showing that it would have no material economic impact on nearby competitors. 

If there's anyone that the Commerce Commission should have been raking over the coals for the last couple weeks, it's the ones responsible for a planning and consenting system that views competition as a harm to be mitigated. I'm a fan of criminalising cartel behaviour, when it comes to town planning systems. 

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