A Watershed Moment for Competition

Some issues that are first exposed by a few individuals gain momentum slowly, then suddenly reach a watershed moment and become mainstream. Looking through The Post and related media today, I sense that happening around us in relation to our failed grocery, banking and electricity markets.

The starting point was last Thursday when I sat through the presentation by Nicola Wills at Waikato University, in which she surprised her audience of economists by putting the focus on competition matters including failed markets, rather than macroeconomic challenges. We can debate whether her preference to simply clear the way for a third entrant in the supermarket sector is the right option – I personally think we need to restructure what we already have. But the emphasis she put on it was unambiguous – they're facing action and life in supermarket land is about to get a lot less comfortable.

Then there were three related articles on The Post site today.

First, extensive coverage of the submission by Monopoly Watch on the reform of competition law. This is clearly the most insightful and constructive contribution to the debate since the issue was first raised. Monopoly Watch founder Tex Edwards, the man who founded mobile phone company 2degrees, has excelled himself. (I know Tex has had a small team of students helping him with this over the vacation, and they too can take a huge bow - it will look great on their CVs in the future!)

Most compelling is Monopoly Watch’s opening statement that “a fundamental intergeneration distrust is emerging and fracturing social cohesion; privileged monopoly and oligopoly structures perpetuate inequality and squash innovation.” The reality is that competition is utterly essential to capitalism doing its job for the community. Without competition a society descends into an oligarchy as we are seeing now. The Monopoly Watch Submission goes on into some very constructive detail.

Second, an excellent contribution by the Grocery Action Group through Sue Chetwin. GAG argues correctly that the solution is not merely to clear the barriers to new entry and hope an overseas entrant flies in. It says, correctly, that forced divestment of the stores we have is the only solution. That’s the key message that Nicola Willis, and Commerce Minister Andrew Bayly, need to take aboard.

Third is an opinion piece by the convenor of the Banking Reform Coalition, Kent Duston. I admire the work Kent has done to establish the group and bring the shortcomings of our banks into public prominence, just as GAG has in the grocery issues.

That said, I’ll beg to differ with Kent this one time. His denunciation of the Commerce Commission and its staff feels very unfair. My observation over the years is that they are a highly committed team who come to work with a desire to make a positive difference. And I agree with Kent that their market study work has been of very high quality.

But to blame the Commission and its staff for lack of follow up is a step too far. The next moves have to come from politicians. Commission staff can’t just walk into the New World in Thorndon and demand that it be sold to a competing operator. What we need is political will.

Will that happen? It's hard to imagine with our three-headed-monster government having three discernably different views and being subject to unconstrained lobbying by businesses and their associations to an extent seldom seen before.

So watch this space.

Am I optimistic? Yes! I remember during the decade-long campaign to break up our telecommunications monopoly there were two or three moments when I suddenly sensed we had crossed a threshold and moved up a gear. I can even remember exactly where I was when those moments occurred.

Reading The Post today was a moment like that. Bring it on!