Nicola Willis's "Express Lane" for Supermarkets Positive but Far From Complete

Nicola Willis’s announcement of an express lane for supermarkets has some positive features but is arguably fixing the wrong problem.

New Zealand’s core issue is not having too few supermarkets, but having supermarket ownership concentrated in too few hands.

The root cause of that concentration is not having too much regulation, but having too little and failing to enforce it competently. For example, our regulatory system allowed Foodtown and Woolworths to merge in the 2000s, the duopolists to blatantly “land bank” specifically for the purpose of keeping new entrants out, and Foodstuffs to take an ownership position in The Warehouse so as to frustrate its entry into the grocery market. Then as the devastating effects of these actions on competition became clear, any penalties or remedies have been at best, derisory.

So trying to fix the problem by treating it as starting from over-regulation will be at worst a total failure, or at best will push the solution out to the 2040s or beyond.

Only structural separation, whether government-enforced or voluntarily under government supervision, can provide a comprehensive and timely remedy.

A positive feature of the Minister’s announcement is the invitation to the incumbents to put forward market-led solutions. Foodstuffs and Woolworths are arguably better resourced than government and its agencies to identify a workable solution. However, the government will need to be extremely careful to make sure any proposal they put forward is watertight with no wiggle-room for escape.

In summary, the express lane may be open, but it leads in a winding direction to a destination that is not necessarily where consumers need it to go.