The Greens would take 120 supermarkets into public ownership for $2.8 billion and let councils lease out shops left empty for a year without owners’ consent. Labour would outlaw “excessive” food prices and separate supermarkets’ distribution arms from their retail businesses.
The Labour Party is vowing to introduce new requirements for how Foodstuffs and Woolworths run their wholesale supply lines. Chris Hipkins (left) and Arena Williams made the announcement. Photo / Azaria Howell
In April, New Zealand First proposed that Foodstuffs be cut in half. On September 16, National agreed – if it wins the election and the Commerce Commission approves.
National leads this Government and expects to lead the next. When Finance Minister Nicola Willis first floated a break-up in March last year, I wrote in this column that it risked every large business concluding that its ownership structure is vulnerable to political whim. Eighteen months on, it is National’s policy for the next term.
Auckland grocers formed Foodstuffs in 1922 to buy together while remaining independent owners. Its North and South Island co-operatives still belong to the grocers running 500-odd Pak’nSave, New World and Four Square stores. Those grocers own the distribution centres and trucks too. A century of buying together is why a Pak’nSave prices as cheaply as it does.
National points out that, under its proposal, no owner will be forced to sell. But keeping your store is not the same as keeping the arrangements that its prices depend on.
The Government’s own analysis does not measure whether New World and Pak’nSave hold each other’s prices up. It assumes they do. All the promised gain rests on that assumption.
One distribution centre picks for New World, Pak’nSave and Four Square, with one truck run dropping at any of the three. Split them and somebody must build the second network.
The analysis assumes that will add 1% to the cost of goods sold. At 2% most of the promised gain vanishes.
And a company that may be ordered to split itself in two has reason to put off its next investment, not to mention every other firm now wondering whether it is next. Liam Hehir argued here on Tuesday that breaking up big business is a respectable conservative tradition – especially in America. But courts broke up Standard Oil and AT&T after the United States sued them for violating antitrust laws. Neither involved Parliament dividing a lawful business by statute.
New Zealand First and its leader Winston Peters have proposed splitting Foodstuffs. Photo / NZME
The New Zealand Initiative has long argued that politicians think about competition the wrong way. What holds prices down is not how many competitors a market has but how easily another could open.
My colleague Eric Crampton told a select committee in 2023 that planning laws made large-scale supermarket entry in New Zealand so close to impossible that it might as well have been explicitly forbidden.
Would-be entrants, asked by the Finance Minister what stood in their way, named zoning rules and slow consents. Ten district plans contain 14 provisions that cap the number of supermarkets an area may have. Parliament fast-tracked new supermarket sites last December but left the district plans untouched. The Government’s own Grocery Commissioner says the reforms need time to bed in.
Before taking an axe to a private business, Parliament should make it possible to open a supermarket and see who comes.
Just days after its supermarket bombshell, National turned its sights on another Kiwi institution – retirement village operators such as Ryman, Oceania and Summerset.
Typically, retirement village residents do not buy their units. They buy a right to live in one and get their money back, less fees, when the next resident takes over.
National would make operators repay a departing resident within nine months, whether anyone has taken the unit or not. Labour would make it three. But requiring repayment sooner does not make the money to pay it available any sooner. It just means operators will have to hold more capital – and capital comes at a cost.
National, led by Christopher Luxon, has proposed requiring retirement village operators to repay departing residents within nine months. Photo / Hagen Hopkins
Officials estimate a three-month deadline could require up to $4.1 billion of extra capital and add up to $118,000 to the price of a retirement village unit. Nine months will cost less, but the cost will turn up nevertheless, either in what a new resident pays, or in how many retirement villages get built. There is, as they say, no such thing as a free lunch – even in retirement villages.
There are times when a Government has good reason to override arrangements people have lawfully made or restrict those they would make. But it must show that the benefits justify the costs. The official estimates put substantial costs against uncertain benefits. That is a weak foundation for interfering in other people’s business.
The grocers who met in Auckland in 1922 built a co-operative they expected to keep. Parliament may now divide it. The woman moving into a retirement village next year will pay more than she would have, on terms she did not choose.
Parliament can nationalise a supermarket chain, force divestment or regulate prices. But it cannot order investors to build the next supermarket or retirement village.
Nobody builds what they cannot keep.
Roger Partridge is chair and a senior fellow at The New Zealand Initiative. Foodstuffs and Woolworths are Initiative members, and Nicola Willis is a former member of the Initiative’s governance board. None of them have been consulted in relation to this column.
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