Market Dominance, Ethics and the Meaning of Life
This was published in the Herald today. For those without a Premium subscription, I've copied the original text below..
MARKET DOMINANCE, ETHICS, AND THE MEANING OF LIFE
by Ernie Newman
Supermarket industry leaders should be taking a long look in the mirror following the Commerce Commission’s Market Study. Likewise, those in other industries where there is community concern about abuse of power including oil companies, building supplies and banks.
The Commission has grown its capability substantially in recent years and this shows in the depth of the Study. It looks like an agency whose moment has come – a far cry from 2009 when its very existence was under threat from white-anting by a few dominant companies. That reflects widespread political commitment to tackle anticompetitive behaviours. Supermarkets may be just the start.
Market dominance is a complex issue legally, practically and ethically. There is nothing wrong with size per se. Size can signify success - being the biggest kid in the class, or the biggest supermarket in town, is very cool. Size becomes a problem only when used anti-socially through bullying behaviour or impingement on the rights or lives of others.
The current Study comes against the backdrop of a wider social issue. Today’s Kiwis are experiencing extraordinary concentration of wealth in a very few hands. Never have the poor been so poor relative to the rich. Despite a socialist government, it’s getting worse.
Meanwhile among a few New Zealand companies, the whole notion of ethics in business has been lost. These few seem to have missed the memo about “conscious capitalism” promoted by leaders like the US Business Roundtable in 2019, who rejected the 1980s view that companies should focus solely on shareholder profit.
Those few continue to see business as nothing more than a game of Monopoly in which the sole objective is to bankrupt every other player so as to achieve ownership of the entire estate. Who gives a toss about the mere losers?
Except that in real life there’s somewhat more at stake. In the grocery business, if maximising shareholder wealth becomes the sole purpose, customers pay a massive price. Kids starve.
Businesses instinctively rail against regulation. However, the politics around competition regulation are not a simple tug of war between businesses and governments. They are about the tension between a tiny minority of big businesses who abuse excessive market power, and the great majority who thrive amid competition. Those ordinary businesses suffer, alongside consumers, as victims of the bullies.
That explains why the release of the Commission’s supermarket study hasn’t drawn howls of protest from our umbrella business organisations. They have far more members who are good corporate citizens and are victims of abuse of market power, than the handful of miscreants.
So are we in for years of tortuous conflict while the government works through its cumbersome and adversarial processes, industry by industry, and lawyers get rich? On the present trajectory, yes, necessarily - shoppers and suppliers can’t continue to suffer these excesses.
However, business leaders can ease the pain for themselves.
Maybe the directors and leaders of the companies being challenged, in this case Foodstuffs and Woolworths, should rethink how they apportion their responsibilities among the various stakeholder groups? They should show by their actions that they are listening and will re-balance the weighting that their customers, employees, and the community are given relative to shareholders - not forgetting the planet as well.
That won’t stop the government in its tracks, but it might result in a softer landing.
Maybe leaders in the marketing profession too, could focus collectively on ways to voluntarily rid New Zealand of marketing strategies that deliberately set out to confuse consumers? The grocery and telecommunications sectors are masters at these strategies and, more recently, oil companies.
Maybe the companies and leaders who run big businesses that are genuinely both ethical and successful – Mainfreight and Air New Zealand seem like examples – could exert peer influence on those at the polar extreme – those who think ticking the “social responsibility” box merely requires an occasional donation of a pallet of produce to a foodbank, preferably on the 6pm news?
At school, thankfully, there were smaller kids with principles who irrespective of their size, had the guts to call out the bullies. Business should be no different - behaviours that are unacceptable from an individual don’t suddenly become ok because they are perpetrated by a group whether a sports team, a gang, a school class, or a company.
Humility goes a long way. As Theresa Gattung said publicly when the government axe fell on Telecom “This is the start of our new way of life…we are committed to this new direction…we will play by the rules…we will be true to our word.”
I’m all for capitalism - its the best of the imperfect options for running a society. But it must be ethical capitalism with rules and conventions to save it from itself. Businesses that forget their social responsibilities risk losing their social license.
The actions of some businesses very close to all our homes are teetering on the brink.
Ernie Newman is a Waikato-based consultant who has worked in many business organisations over more than 40 years. He advises a number of clients including the Food and Grocery Council, but the views in this article are entirely his own.