MWNZ Response To Minister Willis Grocery Market Structure Announcement

All Hands-on Deck: Supermarkets are again in the spotlight; Certainty that that real structural change is on the horizon is delivered

A well-researched and confident Q&A from the Minister regarding supermarkets this morning should leave Kiwis feeling inspired. This is the most to-the-point message we have heard on structural reform since the NZ telecommunications break up in 2007.

Ultimately, one thing is clear: it’s time for Kiwis to stop feeling the pain when swiping their card at supermarket checkouts and incumbent supermarket owners and board members are in for substantial change .

Minister uses a similar toolbox of an RFI (request for information which will be managed by officials , it’s the context of what can be discussed which makes it an attractive proposition ) process, which is supported by a parallel process (whereby officials will be reviewing what a structural break up of the supermarkets looks like ).

The Minister's tone today showed a meaningful understanding of the supermarket industry and the issues it faces, sending a demanding message to incumbents that change through competition-driven initiatives is on the way. This is no laid-back task, and there is no easy solution, but the Minister has made it clear that this is a problem she is willing to go full steam ahead on.

It was the fact that there was actually 3 processes running simultaneously, created the impetus in the ministers announcement . The 3rd process was the call for the incumbents to consider voluntary break up using a part of the Commerce Act called 69F , which is where counterparties agree divestments with the Commerce Commission to allow deals to take place.

The All-Hands-on Deck , Quote “ I’m putting all options on the table “ by Minister Willis is a sentiment is reinforced by backup processes, which has led to confidence at Monopoly Watch that a new market structure will occur.

What Monopoly Watch respected about the statement was

1. It has three action processes which will run in parallel
2. The sheer literacy of the size and scope of the commercial mountain
3. Sense of urgency and connection to consumers with a serious market structure problem
4. Her ability to see through the spin of the lobbyists
5. Discussion of the J curve upfront losses, means there is sensitivity to what the barriers to competition are
6. The Ministers use of the scale word 8 times in the first two pages
7. The mention and suggestion that incumbents use section 69A of the Commerce Act to propose divestments voluntarily, repeats the language
8. The mention of Margeret Thatcher in the Q & A section (when the Minister responded to a quote from Anthony Albanese) it fractured the thought the minister was anti-business , or weak at the knees .
9. The assurances that RFI will be in confidence, allowing 4 Square owners to conflict with the Pak n Save owners and allowing fresh choice franchises to expose conflict with Woolworths

Overall, the Minister's announcement stressed the details of what the barriers to entry were, but the Minister was focused and ambitious on what a real solution would look like and quarantined the efforts of lobbyists in explaining what was required for price competition.

Ultimately, it’s the urgency, tone and thought of the Minister's announcement today that unites Kiwis in what can sometimes feel like a David and Goliath battle.

MWNZ has been involved in the review of the Supermarket industry for over 5 years and was an active submitter in the ComCom market study, commenting on everything from the terms of reference to the final report. MWNZ visited several international regulators, specialist private equity firms and competitive supermarket operators and hired 3rd party economists to support its research. MWNZ team members were actively involved in breaking up a Telecommunications cartel in NZ and securing over a billion dollars of fresh capital commitments . MWNZ has financially modelled a 3rd supermarket operator in NZ

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