Wednesday, 2 Dec 2020

Supermarket prices: Commerce Commission probe did nothing for petrol prices, supermarkets won’t be squirming either

OPINION:

Even someone with the lungs of champion freediver William Trubridge would be well-advised not to hold their breath for any prompt changes to supermarket pricing.

Despite the big announcement of Government sending out its attack dog, the Commerce Commission, to sniff around supermarkets, consumers aren’t likely to see any change in the aisles any time soon.

We’ve been here before – and we’ve seen first-hand how slowly the bureaucratic machine creaks forward toward meaningful change.

In 2018, the Government announced a similar probe into fuel companies and whether Kiwis were paying too much at the pump.

It took a full year for the Commerce Commission to conclude that Kiwis weren’t getting a great deal and that change was necessary.

Six months later, around the middle of this year, the government accepted recommendations made by the Commerce Commission and incorporated new regulations to improve wholesale competition among fuel companies.

AA PetrolWatch spokesman Mark Stockdale confirms consumers would be justified in scratching their heads and wondering why fuel prices haven’t dropped significantly.

Stockdale explains it’s partly because the government introduced an 18-month lead time, meaning most of the changes haven’t actually come into effect yet.

The one change drivers are likely to notice at a retail level is the display of pricing for premium grade petrol on service station price boards. Stockdale says that while this change was also subject to 18-month lead time, some fuel retailers have decided to start displaying this pricing of their own volition. The thinking is that this will encourage retailers to keep their prices down for fear of losing customers to competitors, but the verdict is still out on whether it actually has this impact.

As far as the other changes go, Stockdale says we’ll likely have to wait until the end of next year to see what happens once the 18-month lead time expires.

We’ve seen this slow progress despite the fact that Prime Minister Jacinda Ardern openly stated that motorists were being “fleeced” at the pump.

So what level of urgency can we really expect to see in the grocery price probe?

Based on the petrol probe timeline, the supermarket investigation isn’t likely to deliver any material changes for years.

“You’re looking at the end at 2021 for the delivery of the report,” starts Stockdale.

“Then a further six months for the recommendations to become regulations. And then probably another 18-month lead time. So we probably won’t see anything material until the end of 2023.”

There’s also more complexity when it comes to supermarket pricing. Any regulatory change adding pressure to supermarkets could have the inadvertent impact of making things harder for suppliers, who have long bemoaned the struggle of keeping their place on the supermarket shelves.

This isn’t only about the shopper. It’s also about the small businesses scattered throughout New Zealand that run on paper-thin margins and face continuous pressure to keep their costs as low as possible.

The Government will have to proceed with caution to ensure that its efforts to help Kiwi consumers, it doesn’t hurt the invisible workforce making the products we buy. Any regulatory change will need to be militantly cognizant of this throughout the process.

Make no mistake, it would be great for shoppers to get a better deal out of what is effectively a local market duopoly.

But it’s important that it doesn’t come at the expense of those who actually give us the wide spread of choices we love to complain about.

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