1 00:00:05,760 --> 00:00:08,840 Speaker 1: Kiota. I'm Chelsea Daniels and this is the Front Page, 2 00:00:09,240 --> 00:00:17,200 Speaker 1: a daily podcast presented by the New Zealand Herald. An 3 00:00:17,200 --> 00:00:21,639 Speaker 1: investigation into the supermarket majors is underway as a merger 4 00:00:21,720 --> 00:00:25,320 Speaker 1: of hundreds of stores around New Zealand fails to satisfy 5 00:00:25,640 --> 00:00:31,200 Speaker 1: a competition watchdog. Ahead of its final decision later this year. 6 00:00:31,560 --> 00:00:34,920 Speaker 1: The Commerce Commission said that a merger of Foodstuff's North 7 00:00:34,960 --> 00:00:40,040 Speaker 1: Island and food Stuff South Island would affect significant structural 8 00:00:40,200 --> 00:00:43,400 Speaker 1: change in the sector and it continues to have concerns 9 00:00:43,479 --> 00:00:48,320 Speaker 1: around competition. It's all while the Commission's investigating after Consumer 10 00:00:48,400 --> 00:00:52,599 Speaker 1: and z lodged a complaint claiming supermarkets were engaging in 11 00:00:52,720 --> 00:00:58,520 Speaker 1: misleading pricing. So what will all this mean for you 12 00:00:58,960 --> 00:01:02,360 Speaker 1: and the price of your weekly grocery shop? Today on 13 00:01:02,360 --> 00:01:06,120 Speaker 1: the front Page, we're talking all things supermarkets, first with 14 00:01:06,319 --> 00:01:11,000 Speaker 1: nzet Herald reporter Kate McNamara and then with independent consultant 15 00:01:11,120 --> 00:01:19,640 Speaker 1: Ernie Newman. Kate, can you explain how food Stuffs currently operates, 16 00:01:19,680 --> 00:01:23,480 Speaker 1: particularly as this North Island South Island split is a 17 00:01:23,480 --> 00:01:24,679 Speaker 1: bit confusing on paper. 18 00:01:24,920 --> 00:01:28,920 Speaker 2: Yeah, So they are two separate entities, their owner operator 19 00:01:29,200 --> 00:01:33,240 Speaker 2: co ops. So they're co ops the shareholders of which 20 00:01:33,800 --> 00:01:38,840 Speaker 2: are the owners of the individual stores, and they are 21 00:01:39,280 --> 00:01:43,479 Speaker 2: two single island co ops. So there's food Stuff's North 22 00:01:43,520 --> 00:01:47,400 Speaker 2: Island and it really only sells well, it only sells 23 00:01:47,560 --> 00:01:51,000 Speaker 2: in the geography of the North Island and food Stuff's 24 00:01:51,000 --> 00:01:54,040 Speaker 2: South Island that only sells in the geography of the 25 00:01:54,080 --> 00:01:57,800 Speaker 2: South Island. So that's at the retail level. They do 26 00:01:58,160 --> 00:02:02,000 Speaker 2: work together in a variety of areas. Largely and quite 27 00:02:02,200 --> 00:02:07,880 Speaker 2: importantly for the Commerce Commission, they buy separately from suppliers, 28 00:02:08,040 --> 00:02:12,400 Speaker 2: but that's not absolute, and they do overlap. They buy together, 29 00:02:12,480 --> 00:02:15,119 Speaker 2: for example in some instances. One example is when they're 30 00:02:15,160 --> 00:02:20,520 Speaker 2: buying for the home brands, so PAMs for example. So yeah, 31 00:02:20,600 --> 00:02:24,000 Speaker 2: areas of working together. If you, as a media person 32 00:02:24,080 --> 00:02:27,119 Speaker 2: go to get comment, you'll generally find that there's kind 33 00:02:27,160 --> 00:02:31,000 Speaker 2: of one operation for dealing with the media these days, 34 00:02:31,040 --> 00:02:34,000 Speaker 2: or at least they share services across that area. And 35 00:02:34,120 --> 00:02:37,799 Speaker 2: of course they share banners, so pack and Save New 36 00:02:37,840 --> 00:02:40,839 Speaker 2: World and four Square are the main ones, and they 37 00:02:41,320 --> 00:02:44,800 Speaker 2: each separately have other businesses and banners as well. 38 00:02:45,040 --> 00:02:48,880 Speaker 1: So what is food Stuffs wanting to do with this merger. 39 00:02:48,760 --> 00:02:52,480 Speaker 2: Well, it wants to become one single national entity. So 40 00:02:53,000 --> 00:02:56,200 Speaker 2: on the one hand, consumers or you know, kind of 41 00:02:56,280 --> 00:02:59,680 Speaker 2: ordinary people might not see a great deal of difference 42 00:02:59,720 --> 00:03:03,400 Speaker 2: because broadly the same name and they share marketing and 43 00:03:03,440 --> 00:03:06,600 Speaker 2: that kind of thing. So visually, certainly and from the 44 00:03:06,639 --> 00:03:09,799 Speaker 2: outside it might not look very different. But they would 45 00:03:09,880 --> 00:03:15,079 Speaker 2: have scope to do very many more business things together 46 00:03:15,639 --> 00:03:18,239 Speaker 2: as a single entity, so it would be quite a 47 00:03:18,240 --> 00:03:18,960 Speaker 2: big change. 48 00:03:19,080 --> 00:03:22,040 Speaker 1: So essentially we've got food Stuffs North Island, food Stuffs 49 00:03:22,120 --> 00:03:25,079 Speaker 1: South Island, and of course the Woolworths Group end Z 50 00:03:25,320 --> 00:03:29,520 Speaker 1: which is run by Walworth's Australia at the moment. Essentially, 51 00:03:29,520 --> 00:03:32,240 Speaker 1: do we have kind of two point five in our 52 00:03:32,480 --> 00:03:34,880 Speaker 1: supermarket's competition at the moment and this would kind of 53 00:03:34,920 --> 00:03:35,840 Speaker 1: bring it down to two. 54 00:03:36,280 --> 00:03:38,600 Speaker 2: Yeah, you could think of it that way. In its 55 00:03:38,720 --> 00:03:42,680 Speaker 2: market report that the Commerce Commission conducted and completed in 56 00:03:42,680 --> 00:03:46,840 Speaker 2: twenty twenty two, it decided that food Stuffs together and 57 00:03:47,560 --> 00:03:53,560 Speaker 2: Woolworths constitute a duopoly, essentially two big players in the market. 58 00:03:54,640 --> 00:03:57,720 Speaker 3: The Commerce Commission said the duopoly of Wilworth's ENZ and 59 00:03:57,800 --> 00:04:00,880 Speaker 3: food Stuff so it was not working well dealing consumers. 60 00:04:01,200 --> 00:04:04,040 Speaker 3: It found New Zealand supermarkets are making more money than 61 00:04:04,080 --> 00:04:08,080 Speaker 3: those overseas, and then our grocery prices are higher. The 62 00:04:08,080 --> 00:04:11,120 Speaker 3: Competition Watchdog has stopped short of calling for a major 63 00:04:11,160 --> 00:04:12,360 Speaker 3: structural change to the. 64 00:04:12,320 --> 00:04:17,160 Speaker 2: Sector that does, as you kind of suggest, it masks 65 00:04:17,480 --> 00:04:21,760 Speaker 2: the kind of particularities of food stuffs because they aren't 66 00:04:22,320 --> 00:04:26,039 Speaker 2: one big player, although they don't compete on the retail level, 67 00:04:26,080 --> 00:04:28,840 Speaker 2: because they occupy different geographies. 68 00:04:29,120 --> 00:04:34,000 Speaker 1: Why are regulators and food suppliers so opposed to the merger. 69 00:04:34,080 --> 00:04:38,479 Speaker 2: Well, we don't know that the regulator is opposed to 70 00:04:38,560 --> 00:04:42,680 Speaker 2: the merger. So the process that they go through is 71 00:04:42,960 --> 00:04:46,880 Speaker 2: they've chosen to go through three steps, So they issue 72 00:04:47,000 --> 00:04:51,960 Speaker 2: statements of issue and they outline what they consider to 73 00:04:52,000 --> 00:04:55,640 Speaker 2: be areas of law that they have not yet satisfied 74 00:04:55,680 --> 00:04:59,520 Speaker 2: themselves of wherein there would not be a substantial lessening 75 00:04:59,560 --> 00:05:02,920 Speaker 2: of com petition. But because the process is still ongoing, 76 00:05:02,920 --> 00:05:06,880 Speaker 2: they've just issued their third statement outlining areas where they 77 00:05:06,960 --> 00:05:09,440 Speaker 2: still need to be satisfied that there wouldn't be this 78 00:05:09,520 --> 00:05:14,240 Speaker 2: substantial lessening. And we'll get a decision ultimately in October. 79 00:05:14,240 --> 00:05:17,240 Speaker 2: But it's not over yet, so we can't say yet 80 00:05:17,400 --> 00:05:21,800 Speaker 2: that they're opposed. Suppliers can tend and this is one 81 00:05:21,880 --> 00:05:25,000 Speaker 2: of the areas where regulators still want to be satisfied 82 00:05:25,040 --> 00:05:29,280 Speaker 2: that the merger wouldn't reduce competition, But suppliers contend that 83 00:05:29,920 --> 00:05:33,000 Speaker 2: essentially their market, what they call the upstream market, the 84 00:05:33,000 --> 00:05:36,520 Speaker 2: market for food and groceries, that that would be reduced 85 00:05:36,600 --> 00:05:40,440 Speaker 2: from three players in the market to two if food 86 00:05:40,440 --> 00:05:45,080 Speaker 2: stuffs was consolidated into one. Remember, largely they operate separately 87 00:05:45,200 --> 00:05:48,240 Speaker 2: as buyers, So at the minute, if you're a supplier, 88 00:05:48,480 --> 00:05:51,400 Speaker 2: you likely if you supply food stuffs on both islands, 89 00:05:51,480 --> 00:05:54,960 Speaker 2: you likely deal with a number of different entities. Buying 90 00:05:55,040 --> 00:05:58,800 Speaker 2: is very centralized by foodstuffs North Island. It's less centralized 91 00:05:58,839 --> 00:06:02,160 Speaker 2: on the South Island. Buy from a number of different 92 00:06:02,200 --> 00:06:06,000 Speaker 2: buyers and you would essentially be dealing with a single 93 00:06:06,440 --> 00:06:09,359 Speaker 2: entity if there was a merger. And the Commerce Commission 94 00:06:09,360 --> 00:06:12,720 Speaker 2: has outlined that it's worried about this. It has yet 95 00:06:12,800 --> 00:06:17,039 Speaker 2: to be satisfied that this wouldn't substantially lessen competition. It 96 00:06:17,200 --> 00:06:21,440 Speaker 2: suggests that it might push prices down for suppliers in 97 00:06:21,720 --> 00:06:25,320 Speaker 2: selling their goods, and it's not convinced that you know, 98 00:06:25,360 --> 00:06:27,720 Speaker 2: if there was a price reduction, that that would flow through, 99 00:06:27,760 --> 00:06:31,120 Speaker 2: for example, to benefit consumers, and that it might basically 100 00:06:31,160 --> 00:06:33,880 Speaker 2: increase the market power of food stuff such that they 101 00:06:33,920 --> 00:06:37,839 Speaker 2: could do a variety of things which would be potentially 102 00:06:37,920 --> 00:06:41,640 Speaker 2: damaging to the suppliers, and it worries could also flow 103 00:06:41,680 --> 00:06:46,200 Speaker 2: through to damage to customers. For example, it could make 104 00:06:46,279 --> 00:06:49,440 Speaker 2: it more difficult if you have this merge to food stuffs, 105 00:06:49,720 --> 00:06:53,400 Speaker 2: it could essentially prove to be a barrier to entry 106 00:06:53,560 --> 00:06:56,560 Speaker 2: for other competition if it were to try to enter 107 00:06:56,640 --> 00:06:59,640 Speaker 2: the market. You know, a merged entity would be better 108 00:06:59,680 --> 00:07:03,120 Speaker 2: able to get lower prices, arguably better able possibly to 109 00:07:03,120 --> 00:07:06,039 Speaker 2: get exclusivity in and so that would potentially make it 110 00:07:06,080 --> 00:07:08,839 Speaker 2: harder to break into the market. And to the degree 111 00:07:08,839 --> 00:07:11,760 Speaker 2: that it serves as a barrier to new competition, then 112 00:07:12,040 --> 00:07:15,440 Speaker 2: obviously that's something that the Commerce Commission is concerned about. 113 00:07:15,600 --> 00:07:19,080 Speaker 1: You spoke with Chris Quinn, the man who will likely 114 00:07:19,120 --> 00:07:22,280 Speaker 1: be in charge if this merger goes ahead. How has 115 00:07:22,320 --> 00:07:23,760 Speaker 1: he defended it well. 116 00:07:24,160 --> 00:07:28,640 Speaker 2: He says that food stuffs is relentlessly focused on efficiencies 117 00:07:29,280 --> 00:07:32,240 Speaker 2: and that a merger would allow the entities to be 118 00:07:32,400 --> 00:07:37,320 Speaker 2: more efficient, and that efficiencies will flow through to customers 119 00:07:37,480 --> 00:07:42,920 Speaker 2: and prices, and that because prices are determined by more 120 00:07:43,000 --> 00:07:47,640 Speaker 2: factors than just supermarket costs, that it wouldn't necessarily be 121 00:07:47,760 --> 00:07:50,720 Speaker 2: the case that we would have lower prices after a 122 00:07:50,760 --> 00:07:53,920 Speaker 2: merger than beforehand, because of course you have, you know 123 00:07:53,960 --> 00:07:57,200 Speaker 2: the effect of global pricing on commodities like milk and 124 00:07:57,240 --> 00:08:00,560 Speaker 2: butter and all sorts of other variables. But the degree 125 00:08:00,600 --> 00:08:04,360 Speaker 2: that we're looking at the supermarket's cost then the supermarket 126 00:08:04,360 --> 00:08:07,880 Speaker 2: would be able to reduce he says, its costs through 127 00:08:07,920 --> 00:08:10,760 Speaker 2: these efficiencies, and so he says prices would be lower 128 00:08:10,800 --> 00:08:14,360 Speaker 2: than they would otherwise have been. I don't think anyone 129 00:08:14,440 --> 00:08:16,720 Speaker 2: doubts that it would be more efficient. I think if 130 00:08:16,760 --> 00:08:20,400 Speaker 2: you have you know, two entities doing broadly similar things, 131 00:08:20,480 --> 00:08:22,760 Speaker 2: to condense them into one, you know, you have one 132 00:08:22,880 --> 00:08:25,880 Speaker 2: head office set of overheads, you have one supply chain 133 00:08:25,920 --> 00:08:28,880 Speaker 2: that you're managing, that's going to be more efficient. But 134 00:08:28,920 --> 00:08:32,240 Speaker 2: there are other factors at play. You could, happily, on 135 00:08:32,280 --> 00:08:36,200 Speaker 2: the basis of improving efficiency, reduce market competition right down 136 00:08:36,240 --> 00:08:40,000 Speaker 2: to one single colossus player, and I think most people 137 00:08:40,000 --> 00:08:43,360 Speaker 2: would recognize that actually that would be very bad for markets, 138 00:08:43,360 --> 00:08:46,160 Speaker 2: and it would allow for far too much market power. 139 00:08:46,240 --> 00:08:51,640 Speaker 2: So efficiency is one consideration, but the concentration of market 140 00:08:51,720 --> 00:08:53,680 Speaker 2: power is also a consideration. 141 00:08:56,600 --> 00:08:59,680 Speaker 4: Auckland and Wellington Foodstuffs have already merged in twenty thirteen. 142 00:09:00,080 --> 00:09:03,640 Speaker 4: It was promised to make things much cheaper and so forth. Well, 143 00:09:03,720 --> 00:09:07,800 Speaker 4: Foodstuffs North Island has made over one hundred percent increase 144 00:09:07,920 --> 00:09:10,920 Speaker 4: in profit from twenty thirteen to twenty twenty three, and 145 00:09:11,160 --> 00:09:13,319 Speaker 4: I'm pretty sure customers are paying for that. 146 00:09:15,920 --> 00:09:18,720 Speaker 1: You've been following this case and the widest supermarket issue 147 00:09:18,800 --> 00:09:20,760 Speaker 1: for some time now, what do you make of the 148 00:09:20,800 --> 00:09:21,920 Speaker 1: issues going on here? 149 00:09:22,320 --> 00:09:25,320 Speaker 2: Well, I suppose there are two big issues and the 150 00:09:25,360 --> 00:09:29,520 Speaker 2: first isn't directly related to the second. So the second 151 00:09:29,600 --> 00:09:33,880 Speaker 2: is the merger issue itself and the legal basis on 152 00:09:33,920 --> 00:09:37,160 Speaker 2: which that decision will be made. And then there are 153 00:09:37,360 --> 00:09:41,079 Speaker 2: you know, the sort of tide of public opinion which 154 00:09:41,280 --> 00:09:45,000 Speaker 2: includes I think politicians thinking as well, and kind of 155 00:09:45,040 --> 00:09:48,400 Speaker 2: the way in which the issue has become quite politicized. 156 00:09:48,600 --> 00:09:52,200 Speaker 2: And I think that is a very interesting moment in 157 00:09:52,360 --> 00:09:55,960 Speaker 2: context for the merger application, because we have this moment 158 00:09:55,960 --> 00:09:59,520 Speaker 2: that comes on the heels of three four years of 159 00:09:59,720 --> 00:10:06,280 Speaker 2: very concerted and consistent scrutiny of the supermarket sector, of 160 00:10:06,320 --> 00:10:11,480 Speaker 2: the very high concentration of power that the two players 161 00:10:11,800 --> 00:10:16,120 Speaker 2: wield and the profits that they make. We had through 162 00:10:16,160 --> 00:10:18,280 Speaker 2: the Market Study and through the Commerce Commission we have 163 00:10:18,880 --> 00:10:22,600 Speaker 2: a lot of new money through budgets successive budgets, Budget 164 00:10:22,600 --> 00:10:26,079 Speaker 2: twenty twenty two, Budget twenty twenty three for a grocery 165 00:10:26,120 --> 00:10:30,880 Speaker 2: team the Commerce Commission, for widened powers for the Commerce 166 00:10:30,880 --> 00:10:34,400 Speaker 2: Commission to wield, and so you know, it's part of 167 00:10:34,679 --> 00:10:37,480 Speaker 2: a public and political consciousness I think at the minute 168 00:10:37,520 --> 00:10:41,480 Speaker 2: that concentration of power and the grocery sector. So that's 169 00:10:41,559 --> 00:10:44,400 Speaker 2: kind of the big picture. And inside of that we 170 00:10:44,520 --> 00:10:48,280 Speaker 2: have this unfolding question of a merger which can't actually 171 00:10:48,400 --> 00:10:51,400 Speaker 2: because the Commerce Commission has to make these decisions on 172 00:10:51,559 --> 00:10:55,160 Speaker 2: their merits within the context of the law, it can't 173 00:10:55,200 --> 00:10:58,000 Speaker 2: take into account or it isn't supposed to take into 174 00:10:58,000 --> 00:11:01,840 Speaker 2: account public sentiment or sentiment. So there's kind of an 175 00:11:01,840 --> 00:11:05,600 Speaker 2: interesting tension there what it can do and kind of 176 00:11:05,640 --> 00:11:08,400 Speaker 2: what the government has essentially armed it to do, and 177 00:11:08,440 --> 00:11:11,600 Speaker 2: really the previous labor government armed it to do is 178 00:11:11,920 --> 00:11:15,560 Speaker 2: to take as much time as it needs, you might say, 179 00:11:16,160 --> 00:11:21,080 Speaker 2: and use considerable money and resource as the public sector 180 00:11:21,120 --> 00:11:25,400 Speaker 2: has it to make this determination. So it has a 181 00:11:25,400 --> 00:11:29,280 Speaker 2: lot more firepower than it ever had. It can't change 182 00:11:29,320 --> 00:11:32,600 Speaker 2: the law and the precedence within which it makes the decision, 183 00:11:33,200 --> 00:11:36,520 Speaker 2: but it can throw a lot of resources at the 184 00:11:36,559 --> 00:11:39,280 Speaker 2: decision making to make the right decision, and if it 185 00:11:39,320 --> 00:11:42,800 Speaker 2: goes against then it will need to have done a 186 00:11:42,920 --> 00:11:48,239 Speaker 2: very good and thorough job because of the possibility for challenge. 187 00:11:48,559 --> 00:12:03,040 Speaker 1: Thanks for joining us KAY. 188 00:12:00,520 --> 00:12:03,440 Speaker 5: To discuss what more needs to be done to increase 189 00:12:03,520 --> 00:12:07,400 Speaker 5: competition in our grocery sector. We're joined now by independent 190 00:12:07,440 --> 00:12:14,640 Speaker 5: consultant Ernie Newman. Ernie, can we start with your thoughts 191 00:12:14,640 --> 00:12:17,000 Speaker 5: on the proposed food Stuff's merger. 192 00:12:17,080 --> 00:12:18,840 Speaker 1: Do you think it's a good or bad idea? 193 00:12:19,320 --> 00:12:22,000 Speaker 6: I think it's clearly a bad idea. We already have 194 00:12:22,040 --> 00:12:25,880 Speaker 6: a duopoly. We already have demonstrably one of the three 195 00:12:26,080 --> 00:12:30,000 Speaker 6: least competitive grocery industries on the OEPED and the whole 196 00:12:30,080 --> 00:12:34,679 Speaker 6: notion of cutting two point five grocery retailers down to 197 00:12:34,679 --> 00:12:38,719 Speaker 6: two is totally adverse to the interests of consumers. 198 00:12:39,200 --> 00:12:42,079 Speaker 1: The Commerce Commission has come out saying that the merger 199 00:12:42,160 --> 00:12:44,840 Speaker 1: of food Stuff's North Island and South Ireland could affect 200 00:12:44,960 --> 00:12:48,280 Speaker 1: significant structural change in the sector. It continues to have 201 00:12:48,320 --> 00:12:51,760 Speaker 1: concerns around that competition aspect. How do we get around 202 00:12:51,880 --> 00:12:54,280 Speaker 1: competition in the grocery sector in New Zealand. 203 00:12:54,440 --> 00:12:58,120 Speaker 6: Well, that's a very big question. And by way background, 204 00:12:58,120 --> 00:13:00,720 Speaker 6: there are three initiatives underway with the Common Commission at 205 00:13:00,720 --> 00:13:03,680 Speaker 6: the moment. There is the market Study, there is the 206 00:13:03,800 --> 00:13:07,200 Speaker 6: application for the merger of food Stuff's North and Foods 207 00:13:07,240 --> 00:13:10,439 Speaker 6: South South Island. And there is separate legal action by 208 00:13:10,440 --> 00:13:14,040 Speaker 6: the Communist Commission in relation to food Stuff's North Island 209 00:13:14,400 --> 00:13:17,640 Speaker 6: for anti competitive land to covenants. So somewhere in the 210 00:13:17,679 --> 00:13:19,280 Speaker 6: middle of all that has got to be a solution 211 00:13:19,920 --> 00:13:22,760 Speaker 6: to me, the market study is the key one. You 212 00:13:22,800 --> 00:13:25,160 Speaker 6: know where that is landed now is the market study 213 00:13:25,200 --> 00:13:28,520 Speaker 6: was completed. A Government of the day followed the recommendation. 214 00:13:28,600 --> 00:13:32,200 Speaker 6: It appointed a Grocery Commissioner who's been active now for 215 00:13:32,240 --> 00:13:35,800 Speaker 6: about a year, and basically the recommendation was that we 216 00:13:35,880 --> 00:13:39,559 Speaker 6: wait three years to see how effective his role would be. 217 00:13:40,120 --> 00:13:42,199 Speaker 6: And so we're in that waiting game at the moment. 218 00:13:42,240 --> 00:13:43,960 Speaker 6: Although there are a lot of people who would argue 219 00:13:43,960 --> 00:13:46,560 Speaker 6: we can't afford to wait another three years. It takes 220 00:13:46,559 --> 00:13:49,960 Speaker 6: an action on a problem which is quite clearly staring 221 00:13:50,000 --> 00:13:51,880 Speaker 6: us in the face every time we go and buy 222 00:13:51,920 --> 00:13:53,040 Speaker 6: a packet of Fairnis. 223 00:13:53,280 --> 00:13:53,480 Speaker 5: Well. 224 00:13:53,520 --> 00:13:57,040 Speaker 1: This month actually marks a year since the Grocery Commissioner, 225 00:13:57,080 --> 00:14:01,160 Speaker 1: Pierre van Heerden was appointed after they investigation into our 226 00:14:01,240 --> 00:14:05,240 Speaker 1: supermarket duopoly. Has much changed in the last year since 227 00:14:05,240 --> 00:14:05,920 Speaker 1: his appointment. 228 00:14:06,160 --> 00:14:09,160 Speaker 6: I don't think anything has changed for consumers. I think 229 00:14:09,200 --> 00:14:12,440 Speaker 6: some things have changed for suppliers, but even that is 230 00:14:12,520 --> 00:14:15,679 Speaker 6: pretty much at the margin. The difficulty, I think is 231 00:14:15,720 --> 00:14:17,960 Speaker 6: that he doesn't have the powers that he needs to 232 00:14:18,000 --> 00:14:22,120 Speaker 6: do his job. Clearly, what's needed here is to undo 233 00:14:22,320 --> 00:14:25,200 Speaker 6: the harm that was done by the agglomeration of the 234 00:14:25,240 --> 00:14:28,360 Speaker 6: sector over the last twenty years or so. Most countries 235 00:14:28,440 --> 00:14:32,560 Speaker 6: have three or four or five or sixth competing supermarket chains. 236 00:14:32,600 --> 00:14:35,240 Speaker 6: It's a huge industry with a huge impact on cost 237 00:14:35,240 --> 00:14:38,520 Speaker 6: of living and societal well being and so on, and 238 00:14:38,680 --> 00:14:42,600 Speaker 6: to actually have a duopoly is totally unsatisfactory. So until 239 00:14:42,640 --> 00:14:45,360 Speaker 6: we actually attack the core of the problem, which is 240 00:14:45,440 --> 00:14:48,400 Speaker 6: market structure, we're not going to fix that problem by 241 00:14:48,440 --> 00:14:49,920 Speaker 6: trying to change people's behavior. 242 00:14:50,320 --> 00:14:54,400 Speaker 1: Why won't other world leading supermarkets enter the New Zealand market. 243 00:14:54,440 --> 00:14:58,040 Speaker 1: I'm thinking AUDI is taking over in Australia at the moment. 244 00:14:58,280 --> 00:15:00,840 Speaker 1: Why is it so difficult for them to cut through 245 00:15:00,840 --> 00:15:02,359 Speaker 1: this dieopoly that we're seeing. 246 00:15:02,120 --> 00:15:06,800 Speaker 6: Here because the market is arguably well and truly oversupplied. Ironically, 247 00:15:06,840 --> 00:15:10,200 Speaker 6: we probably have too many supermarkets for our size, and 248 00:15:10,280 --> 00:15:13,280 Speaker 6: to some extent that the actions of the jeopolis by 249 00:15:13,320 --> 00:15:15,760 Speaker 6: flooding the market with kind of a store on every 250 00:15:15,800 --> 00:15:19,000 Speaker 6: street corner to make it impossible for a third imprint 251 00:15:19,040 --> 00:15:22,360 Speaker 6: to come in. And that's been exacerbated by the issue 252 00:15:22,360 --> 00:15:25,520 Speaker 6: of the land covenants. So back in the last ten 253 00:15:25,600 --> 00:15:28,880 Speaker 6: or twenty years, the supermarkets have made a practice of 254 00:15:29,080 --> 00:15:32,080 Speaker 6: tying up all the available land that a competitor might 255 00:15:32,280 --> 00:15:35,200 Speaker 6: use through covenants which say, you know that you can't 256 00:15:35,240 --> 00:15:39,680 Speaker 6: put a butcher or the vegetable store, or certainly not 257 00:15:39,720 --> 00:15:42,600 Speaker 6: a competing supermarket on this piece of land. 258 00:15:43,720 --> 00:15:47,080 Speaker 1: Here, it's possible for large operators to prevent competitors from 259 00:15:47,080 --> 00:15:48,040 Speaker 1: releasing land in. 260 00:15:48,000 --> 00:15:51,040 Speaker 4: The same area, a practice called land banking that's no 261 00:15:51,120 --> 00:15:51,880 Speaker 4: longer allowed. 262 00:15:51,960 --> 00:15:55,000 Speaker 6: Over the ditch, these behaviors that have been banned in 263 00:15:55,000 --> 00:15:58,200 Speaker 6: Australia for fifteen years have been perpetuated against the New 264 00:15:58,240 --> 00:16:02,240 Speaker 6: Zealand consumers. Now they've been called out on that one 265 00:16:02,240 --> 00:16:04,880 Speaker 6: by the Communist Commission, and in the case of food 266 00:16:04,920 --> 00:16:07,600 Speaker 6: Stuff's North Island, there is action going on on that 267 00:16:07,680 --> 00:16:10,520 Speaker 6: front already, but the damage has been done with those 268 00:16:10,560 --> 00:16:14,560 Speaker 6: covenants and it'll take ten or twenty years to get 269 00:16:14,560 --> 00:16:16,920 Speaker 6: to the point that enough land starts to free up 270 00:16:17,360 --> 00:16:19,440 Speaker 6: for a thirty inprint to conumplay coming in. 271 00:16:19,920 --> 00:16:24,280 Speaker 1: You're chief executive of the Telecommunications Users Association of New 272 00:16:24,360 --> 00:16:27,880 Speaker 1: Zealand for eleven years, and during that time when Telecom 273 00:16:27,960 --> 00:16:31,080 Speaker 1: now Spark was split up in separate companies to end 274 00:16:31,120 --> 00:16:34,320 Speaker 1: the monopoly had over the market. How does that change 275 00:16:34,360 --> 00:16:36,800 Speaker 1: compare with what's happening with supermarkets now? 276 00:16:37,080 --> 00:16:41,560 Speaker 6: It was equally long and drawn out. There was equally 277 00:16:42,000 --> 00:16:46,680 Speaker 6: enormous resistance from the telecom people. Interestingly, some of the 278 00:16:46,680 --> 00:16:50,920 Speaker 6: same people are involved in the supermarket industry now. There 279 00:16:51,080 --> 00:16:54,480 Speaker 6: was just as much of an effect on society because 280 00:16:54,520 --> 00:16:58,040 Speaker 6: we had only effectively one fixed line and broadband tellic 281 00:16:58,080 --> 00:17:02,040 Speaker 6: communications company to go to, so the stakes were extremely 282 00:17:02,120 --> 00:17:06,240 Speaker 6: high and it was very, very bitterly fought. The outcome 283 00:17:06,560 --> 00:17:10,320 Speaker 6: of that telecommunications remedy was that we moved from the 284 00:17:10,560 --> 00:17:14,560 Speaker 6: least competitive telecommunications market in the world to one of 285 00:17:14,560 --> 00:17:17,280 Speaker 6: the most competitive, and we really have the value from 286 00:17:17,320 --> 00:17:21,160 Speaker 6: that today and we need to aspire to get that 287 00:17:21,200 --> 00:17:23,480 Speaker 6: same outcome in our grocery industry. 288 00:17:23,800 --> 00:17:26,760 Speaker 1: There was a lot of disappointment last year when Soupy, 289 00:17:27,119 --> 00:17:31,040 Speaker 1: the online supermarket retailer collapsed only after a few years 290 00:17:31,040 --> 00:17:34,920 Speaker 1: of operation. What do you think is preventing new players 291 00:17:34,960 --> 00:17:37,440 Speaker 1: coming into the market to break up that duopoly. You've 292 00:17:37,440 --> 00:17:41,440 Speaker 1: mentioned the land needed, but also online it seems as well. 293 00:17:41,800 --> 00:17:44,960 Speaker 6: Yeah, the Communist Commission has done some good work looking 294 00:17:45,000 --> 00:17:48,560 Speaker 6: at that. Yes, there is a space for online competition, 295 00:17:48,720 --> 00:17:51,040 Speaker 6: but the Commission has made it very clear that there 296 00:17:51,119 --> 00:17:54,119 Speaker 6: is a concept called the main shop. You know, what 297 00:17:54,160 --> 00:17:56,920 Speaker 6: we do was sort of on payday or the Saturday 298 00:17:56,960 --> 00:17:59,399 Speaker 6: after we go out and we get our fortnight or 299 00:17:59,440 --> 00:18:03,160 Speaker 6: our week or months supply of groceries, and a high 300 00:18:03,200 --> 00:18:05,840 Speaker 6: percentage of our grocery spend is done in that one 301 00:18:06,320 --> 00:18:10,399 Speaker 6: main shop. Now, the super type operations are not really 302 00:18:10,440 --> 00:18:13,320 Speaker 6: suited to that. They're good for top up shops. You know. 303 00:18:13,400 --> 00:18:16,679 Speaker 6: Not everyone has access or wants to have access to 304 00:18:17,040 --> 00:18:20,520 Speaker 6: online shopping. There is still a very very large chunk 305 00:18:20,560 --> 00:18:22,600 Speaker 6: of the market for people who want to go out 306 00:18:22,640 --> 00:18:25,639 Speaker 6: to a supermarket once a week, once a fortnite and 307 00:18:25,760 --> 00:18:28,879 Speaker 6: stock up. And that's the part of the market that 308 00:18:29,000 --> 00:18:31,920 Speaker 6: is blocked by lack of sites and by the sheer 309 00:18:32,480 --> 00:18:34,879 Speaker 6: difficulty of trying to come in and compete against a 310 00:18:35,040 --> 00:18:36,880 Speaker 6: very well entrenched Cooperly. 311 00:18:36,800 --> 00:18:39,000 Speaker 1: Should the government get more involved here. 312 00:18:39,200 --> 00:18:41,600 Speaker 6: I think, yes, I think this is going to require 313 00:18:41,600 --> 00:18:45,400 Speaker 6: a political solution, you know, breaking up a failed market. 314 00:18:45,640 --> 00:18:48,800 Speaker 6: There is precedent for it, but governments are reluctant to 315 00:18:48,800 --> 00:18:51,280 Speaker 6: get in. But I think the circumstances here are so 316 00:18:51,480 --> 00:18:54,800 Speaker 6: exceptional that the government will have to And interestingly, it 317 00:18:54,920 --> 00:18:58,320 Speaker 6: was under a national government predominantly that the biggest steps 318 00:18:58,359 --> 00:19:02,000 Speaker 6: in the telecom breakup. Stephen Joyce was the minister at 319 00:19:02,000 --> 00:19:04,480 Speaker 6: the time. But I think the government needs to find 320 00:19:04,480 --> 00:19:07,440 Speaker 6: a really good creative solution to get on there and 321 00:19:07,760 --> 00:19:10,240 Speaker 6: break this up and give us three or four or 322 00:19:10,359 --> 00:19:12,159 Speaker 6: more players. You know, back in the day when I 323 00:19:12,240 --> 00:19:15,879 Speaker 6: worked in the industry in the nineteen eighties, there were 324 00:19:15,920 --> 00:19:18,760 Speaker 6: half a dozen competing supermarkets, and there's no reason why 325 00:19:18,760 --> 00:19:20,920 Speaker 6: it can't recur. That it's a very big industry and 326 00:19:21,119 --> 00:19:23,280 Speaker 6: pretty of money there for a lot more people. 327 00:19:24,160 --> 00:19:32,160 Speaker 1: Thanks for joining us, Ernie. That said, for this episode 328 00:19:32,200 --> 00:19:35,040 Speaker 1: of The Front Page. You can read more about today's 329 00:19:35,080 --> 00:19:38,719 Speaker 1: stories and extensive news coverage at nzat herold dot co 330 00:19:38,920 --> 00:19:42,520 Speaker 1: dot z. The Front Page is produced by Ethan Seals 331 00:19:42,560 --> 00:19:47,399 Speaker 1: with sound engineer Patty Fox. I'm Chelsea Daniels. Subscribe to 332 00:19:47,440 --> 00:19:50,720 Speaker 1: the Front Page on iHeartRadio or wherever you get your podcasts, 333 00:19:51,040 --> 00:19:54,440 Speaker 1: and tune in tomorrow for another look behind the headlines.