I lean a bit to the left when it comes to politics. I’ve always been troubled by the sort of neo-liberal attitudes of the 80s and the “profit at all costs” mantra of Friedman and his ilk. That sort of model works fine for those born on the right side of the tracks and with luck on their side, but tends to leave others out in the cold. I’ve always thought that social safety nets, checks and balances on business, and a general value set of caring was the right way to go.
But at the same time I’m perennially troubled by inefficiency and bureaucracy. While our historical state-run railway, postal and telephone services might have kept employment high, they also delivered low levels of service. While it’s certainly not always the case, sometimes the private sector does a better job of running things.
And so I’m torn – on the one hand appreciating the value of Government intervention, on the other troubled by a dogmatic move to “big Government.” Possibly this is the reason I was so taken by the Scandinavian model of the 90s when I lived there – fantastic social services, efficient and effective infrastructure, and a society that is happy paying relatively high levels of tax in order to achieve what felt like a perfect balance.
This past week has therefore been a tricky one for me as the Commerce Commission released its final report and recommendations around the grocery sector in New Zealand – how would my slightly schizophrenic view of things cope with the suggestion of Government intervention and the lessening of commercial freedom?
Interestingly for me, and depressingly for everyone in New Zealand who needs to buy groceries and wants them to be fairly priced, ComCom, in its wisdom, choked at the first hurdle and failed to recommend regulation of any real impact. This would be bad enough, but ComCom decided to really double down by introducing a bunch of recommendations which, if enacted, will introduce significant compliance costs to the sector. While that might employ a few dozen public sector workers to write reports and the like, the costs will, as always, be borne by the buying public, who had no say in the decisions.
Now I have to admit I have a bit of an interest in this space. I’m involved in an early stage startup, Supie, that is seeking to make a difference to the grocery sector – for shoppers, suppliers and the environment. Supie is an online-only grocery offering, that is enjoying stratospheric growth in Auckland. Obviously my views on the ComCom report are informed by all the time I’ve spent thinking about the grocery sector over the past year or so.
But, bias aside, I’m pretty sure I’d be depressed by the ComCom report even if I had no inside knowledge of the industry. In essence, the report made a couple of big suggestions. Firstly, that restrictive land covenants that the grocery incumbents use to stop competitors building close to their supermarkets be regulated. It may come as a big shock to the Commerce Commission but the future of retail is far less about bricks and mortar, and far more about clicks and new models of fulfillment. Regulating so that new competitors can more easily build big box retail stores is last week’s solution to last year’s problem.
The second recommendation is around the setting up of a new grocery regulator – something that is nothing but distasteful to me. Let’s face it, if you’re a grocery corporate, making hundreds of millions of dollars profit through reducing competition in the sector, you can afford the sort of lawyers and lobbyists who will run rings around the sort of people that could be recruited to staff this new grocery commission. They’ll bury the staffers in reams and reams of paper and tie them in knots. All that a regulator will do is to increase the compliance costs that the duopolistic players will pass on to consumers by way of higher prices. A nice own-goal from ComCom.
The Commerce Commission front footed the report, admitting that the existing supermarket duopoly makes supernormal profits at the expense of consumers. They then decided to do nothing impactful about that situation. What is truly depressing about all of this is that it sends a signal to other anti-competitive industries (building supplies, anyone) that ComCom is a toothless tiger. This report will not only do nothing to increase competition in the grocery sector, but it will embolden players in other sectors to be similarly anti-competitive. A sad day for consumers.
Being held at the mercy of big, bad corporates is bad enough. But when our government agencies find proof of that, then recommend solutions that at best make things no better, and at worst make things even worse, it makes me wonder what the point even is. And if an executive in another monopolistic sector, I’d be running my hands together with glee right now.
Ben Kepes is a Canterbury-based entrepreneur and professional board member. Generally his wife does the grocery shopping, and he does the cooking.
