OPINION: Much of the issue of higher grocery prices comes down to where you decide to put supermarkets.
The headlines are screaming about how we need a new player in the market to hold the duopoly to account.
Yet for a long time we have been acting like we are afraid of too many supermarkets setting up, at least where planning regulations are concerned.
Sense Partners economist Kirdan Lees, who specialises in questions around land use, splits supermarket pricing concerns into three parts.
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First there are the vertical supply chain issues and the fact two supermarket chains are dominant in wholesale operations as well.
Second, there are the strategic actions by the supermarkets themselves around where they put supermarkets and how they lock competitors out of setting up nearby.
This part is tied up with the use of legal tools, like covenants, to block out competitors by making sure large tracts of land can't ever be used to set up a rival supermarket.
The third part is how those strategic actions by supermarkets interact with planning regulations from councils.
Restrictions on land are an important issue when it comes to supermarkets because location is critically important. People generally don't want to travel too far to get to a supermarket, even if they are in a car.
That means you have narrowed down potential sites for a competing supermarket even before you start.
Then there are covenants, something which the Commerce Commission has identified as "likely to be a significant factor preventing or slowing entry and expansion" of rival supermarkets.
The market study identified 120 exclusivity covenants in leases, mainly in major urban centres, which could prevent competitor food businesses, like a fruit or vegetable shop, setting up on suitable land.
At least 100 of these covenants had terms of 20 years or more.
If these covenants are truly anti-competitive then they are illegal under section 28 of the Commerce Act, which prohibits covenants that substantially lessen competition.
However, actually enforcing this rule, is the issue. To do this the Commerce Commission would probably need to take cases on each of these 120 covenants. That is an exercise which would involve extensive legal work establishing the true nature of the market in every individual instance.
This is probably why they seem to be hinting that a law change being an easier option, something like changing the onus of proof by making supermarkets prove a covenant doesn't substantially lessen competition rather than the other way around.
Another option might involve requiring some sort of register where supermarkets have to publish these covenants.
However, once you get past these there are still more land use restrictions which stand in the way of more supermarkets setting up. Unsurprisingly the councils have a big part to play in these.
University of Waikato environmental planning professor Iain White says we do not have the same variety of supermarkets you get in other markets.
We have a lot of large supermarkets to drive to, but what about more of the smaller kind you can walk to, or metro-type supermarkets?
Aldi has made its name with stores that occupy a smaller footprint and stock a more limited range of products.
Yet, as Lees says, there are restrictions on all these different types of supermarkets. There are parking minimum restrictions which increase the cost of setting up a supermarket by hiking the cost of land.
Then there are the opposite type of restrictions, ones which restrict your ability to build a large supermarket, such as in Wellington where there are restrictions on the construction of supermarkets larger than 1500 square metres in some areas.
It's easy to see parallels with the housing debate where a lot of housing development has been held back by the rules councils have put in place out of fear of the load it could place on infrastructure and how new housing might bring down the general "tone" of an area.
For a long time our councils have been concerned about the impact of too many supermarkets in an area rather than too few, and they have been concerned about what too many of them might mean in terms of nearby amenities like town centres, cafes and restaurants.
Instead of encouraging more supermarkets to set up, our councils have generally put in place rules which have made it more difficult.
Lees says the issue is councils don't really consider the impact their planning decisions might have on the wider market for groceries.
"Councils are not really looking at prices. So they're not looking at outcomes for consumers necessarily.
"They're more looking at 'is there a supermarket there?' rather than what are the prices within that supermarket."
Then there is the Resource Management Act planning process itself, which supermarkets seem to have been using to help gum up the plans of competitors to set up nearby.
Theoretically this could be considered anti-competitive behaviour too, yet presumably it would be very difficult to prove a supermarket chain was going beyond simply exercising its legal rights.
This supermarket "duopoly" is something we have created as much through our own actions, or inaction, around some of these land use issues as theirs.
If we truly want to lay the groundwork for some third competitor to be able to come into the grocery market, then we are going to have to tackle issues around land use and development too.
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