Wellington (Tuesday, 8 March 2022) The New Zealand Initiative is applauding the Commerce Commission for their final report into supermarket competition, and says the regulator is right to take issue with the red tape that hinders competitors entering the market.

The Commission recommended easing zoning restrictions so that it is legal to build supermarkets in more places, removing restrictive covenants that hinder supermarket development in prime sites, and ensuring that the Overseas Investment Act and the Sale and Supply of Alcohol Act do not unduly impede entry and expansion.

New Zealand Initiative Chief Economist Dr Eric Crampton said, “For too long it has been effectively impossible for a new grocery chain to enter. Thankfully, the Commission has recommended the abolition of those regulatory hurdles.”

“No sane grocery business would consider entering a small market at the far end of the world under the restrictions New Zealand has had in place. And the Commission recommends striking to the root of the problem.”

“Under existing rules, any entrant would have to find the small number of sites where they would be allowed to put up supermarkets, ensure those sites were not restricted by covenants, secure the sites, and work through years of planning and consenting processes – with hundreds of millions of dollars tied up while waiting. If backed by foreign capital, the entrant would need to add onerous Overseas Investment Office requirements into the mix that could add additional years of delay. And anticompetitive alcohol licensing processes provide their own additional substantial hurdle for a full-service grocer.”

At 9.35, the Commission recommends: requiring district plans and regional spatial strategies to provide sufficient land for choice of sites; setting minimum proportions of urban land zoned for retail grocery; limiting planners’ discretion in approving new grocery stores; counting the positive outcomes of competition as a benefit in planning and not declining consents because of adverse effects on other commercial centres. The Commission also recommends making greater use of mixed-use zoning to enable a range of activities in brownfield sites.

The New Zealand Initiative strongly endorses every one of those recommendations.

Initiative Chief Executive Dr Oliver Hartwich said, “The Government should immediately adopt the Commission’s recommendations to free up land use planning. But it should go further. Why wait for the next review of the Overseas Investment Act to determine whether it poses a substantial barrier to entry? The Government could, today, direct the Office to consider retail grocery to be in the national interest and to approve every application to build new grocery stores.”

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