Supermarket Competition: Focus On What The Evidence Demands

Monopoly Watch applauds the start of a genuine public policy debate on supermarket competition in New Zealand. With over eight years of research in this space, we urge commentators, legislators, and the media to focus on what the empirical evidence demands — not on what plays well at election time, and not on the self-serving, lobbyist-engineered proposals being dressed up as reform.

Let us be direct: addressing supermarket market power is not unnecessary government intervention. It is what functional capitalism requires. When a market is structurally broken — when two players control distribution, geography, and pricing — the result is not competition, it is feudalism with loyalty cards. Fixing it is not an ideological act. It is the correction of a market failure that has been allowed to compound for two decades.

How We Got Here: The 2006 Merger That Nobody Fixed

The root cause of today's supermarket problem is traceable to a single event: the 3-to-2 merger in 2006, which reduced the New Zealand grocery market from three major players to two. That structural shift was never adequately addressed, and no serious attempt has since been made to fix it.

In the years since, what New Zealand has seen instead is a parade of pretend competitors — brands and formats announced with fanfare that do not address the fundamental architecture of the problem. Without an independent distribution channel and genuine geographic alternatives, new entrants are not competitors: they are tenants of the same monopoly infrastructure.

After twenty years, no one with the authority and the tools to fix this problem has turned up to do so.

The Public Knows What Politicians Have Avoided

It is worth noting what New Zealanders themselves concluded when asked directly. In June 2021, Phoenix Research conducted an independent survey as part of the Commerce Commission market study process. The result: 72% of New Zealanders supported breaking up the supermarket duopoly. This is not a fringe position. It is the settled view of the public, formed without lobbying resources and without vested interests.

That mandate has not been acted on. Instead, the policy process has been shaped by those with the most to lose from structural change.

Three Structural Problems That Must Be Solved

Priority 1: Distribution Centre Monopolisation

Any credible solution must anchor a genuine third distribution channel. There are currently only two major distribution centres controlling grocery supply in New Zealand. Without resolving this, food prices will not change regardless of what happens at the store-brand level. Repainting the facade does not fix the foundation.

Priority 2: Geographic Monopolisation

Regional market concentration must be directly addressed. In many parts of New Zealand, consumers have no meaningful alternative to one of the two incumbent operators. Price-conscious shoppers who cannot physically access an alternative remain trapped within the same monopolistic structure — full stop.

Priority 3: Nutrition and Sustainability KPIs

Competition should not be measured on price alone. New performance benchmarks around nutrition outcomes and sustainability must be established and tracked publicly. These are not nice-to-haves; they are the markers of whether a market is genuinely serving the public interest.

Loyalty Cards, Surveillance, and the Hidden Barrier to Entry

The debate about structural reform must extend to loyalty card programmes — and to what those programmes actually represent. Loyalty cards are not simply a marketing tool. They are a mechanism for comprehensive behavioural surveillance. Every purchase, every visit, every product choice is logged, profiled, and used to deepen the incumbents' competitive advantage.

In-store facial recognition technology compounds this further. When combined with loyalty card data, facial recognition enables supermarket operators to track individual shoppers across visits, model behaviour at scale, and build customer intelligence that no new entrant can replicate. This is not a hypothetical risk — it is an active and growing feature of modern retail infrastructure. It constitutes a surveillance-based barrier to entry that has received almost no regulatory attention in New Zealand.

Any genuine competition framework must include open access to loyalty card data on a regulated, anonymised basis. Competitors, regulators, and consumer advocates should be able to access the aggregate market intelligence that loyalty programmes generate. Allowing incumbents to monopolise that data — while using it to price, promote, and profile at a granular level — is itself an anticompetitive act.

New Zealand Is 15 Years Behind: The Open Data Deficit

Underpinning much of this failure is a structural lag in New Zealand's approach to data access. In most comparable economies, open data APIs — standardised interfaces that allow competitors, regulators, and consumers to access market data — have been a regulatory requirement in competitive sectors for well over a decade. New Zealand has not kept pace.

This is not a minor technical detail. Open data infrastructure is what makes competitive markets function in the modern economy. Without it, incumbents accumulate information advantages that compound over time. New entrants cannot price effectively, cannot understand demand patterns, and cannot design offerings that genuinely compete. The data asymmetry becomes as significant a barrier as the physical infrastructure monopoly.

The banking sector is the clearest illustration of this failure. New Zealand's banking market is dominated by an Australian-owned cartel — four major banks operating with margins and profitability levels that would not be sustained in a genuinely competitive market. Three separate government inquiries have examined this. In the time those inquiries ran, bank profitability increased. The reviews produced reports. The market produced higher returns for Australian shareholders.

A core reason New Zealand banking remains so entrenched is the absence of open banking APIs that would allow new entrants to compete on equal data footing. The same dynamic that has protected the banking cartel is now protecting the supermarket duopoly. New Zealand must close this gap — not incrementally, but with the urgency that fifteen years of delay demands.

On the Pak'nSave Question

Pak'nSave represents approximately 15% of supermarket locations in New Zealand, yet accounts for roughly 45% of the volume of goods sold. This figure alone illustrates how critical the economy-class grocery segment is — and how much consumers depend on it. There is a large and underserved demand for genuine price competition in this segment.

The proposal to allow Pak'nSave to operate as a freestanding brand is not, on its own, a solution. As the Commerce Commission market study (2021) identified, New Zealand has already seen an overbuild of supermarkets — particularly large-format stores. The problem was never the number of stores. It is the distribution centre monopoly and the underlying market architecture. A Pak'nSave breakout that leaves both of those intact is not competition; it is the same system with different signage.

Dispelling the Price-Rise Myth

It is sometimes argued that introducing new competition will raise prices — that breaking up the incumbents will disrupt efficiencies and harm consumers. This argument inverts economic reality.

If prices would rise upon the entry of a genuine competitor, that would be evidence that the existing market was incorrectly engineered to begin with — designed to extract monopoly rents rather than to serve consumers efficiently. It would be a confession, not a defence.

Furthermore, it is not a breach of property rights to restructure a monopoly. There are no legitimate property rights in a monopoly rent. No one is being asked to sell their stores. The question is whether operators can remain in coordinated distribution arrangements that perpetuate a structural monopoly. The answer must be no. The law should say so clearly.

Regulatory Failure: Three Reviews, No Results

The pattern in New Zealand grocery markets is not unique. It mirrors what has happened in banking — a sector that has been the subject of three separate government inquiries. After each review, bank profitability increased. The reviews produced reports; the market produced higher margins. The public got neither accountability nor relief.

In 2026, there was an attempt to reform New Zealand's competition law. The amendments that would have made a material difference — the changes that would have given the Commerce Commission genuine teeth — were lobbied out of the legislation before it passed. What remained was a framework that looks like reform without delivering it.

This is the central institutional failure: the Commerce Commission, New Zealand's competition regulator, cannot make binding structural decisions on its own authority. It can study, it can recommend, it can report — but it cannot act. A competition agency that cannot act on competition is not a regulator. It is an advisory committee with a budget.

Monopoly Watch calls for the Commerce Commission to be granted independent decision-making authority commensurate with its mandate. The current structure — where political sign-off is required for meaningful action — guarantees that lobbying will continue to determine outcomes.

Making Capitalism Work for Kiwis, Not for Australian Investors

The supermarket debate, the banking debate, and the electricity debate are not separate problems. They are the same problem expressed in different sectors: New Zealand's markets have been engineered — through regulatory inaction, data asymmetry, and structural consolidation — to serve the interests of offshore investors rather than domestic consumers.

New Zealand is, in practice, a milking ground for Australian capital. The four major banks are Australian-owned. The supermarket duopoly extracts rents from every household in the country. Electricity markets have been repeatedly found to be operating against consumer interests. In each case, the policy response has been to study the problem, produce a report, and allow the incumbents to lobby the remedies into irrelevance.

This is not capitalism. It is a managed extraction system dressed in the language of free markets. The reform agenda must therefore go beyond restructuring individual sectors. It must address the consumer advocacy infrastructure that New Zealand lacks — the institutional capacity to represent consumer interests with the same force and persistence that incumbent industries bring to bear on the policy process.

Specifically, Monopoly Watch calls for:

• A fully resourced, independent Consumer Advocacy Office with standing to initiate regulatory proceedings — not merely to submit to them.
• Mandatory open data APIs across banking, grocery, and electricity sectors, with regulated timelines and enforceable standards — closing the fifteen-year gap that has protected incumbent operators from genuine competition.
• A comprehensive review of foreign ownership concentration in essential consumer markets, with a clear public interest test applied to sectors where market power is structurally entrenched.
• Reform of the Commerce Commission's mandate to include independent structural remedy powers, removing the political chokepoint that lobbyists have exploited to neutralise every previous reform attempt.
• Prohibition on the use of loyalty card data and in-store biometric surveillance (including facial recognition) as a competitive tool, pending development of a regulated open-access data framework.

The question before New Zealand is a simple one: who is this economy for? The answer, right now, is not Kiwi consumers. Changing that answer requires structural reform, institutional courage, and a willingness to treat the evidence as more authoritative than the lobby group with the biggest budget.

Further Recommendations

• Independent advisory capacity: New Zealand should consider engaging independent advisors from jurisdictions with proven track records in structural competition reform — including Scandinavian countries, where utility and food market regulation has produced demonstrably better consumer outcomes.
• Banking and electricity markets: The same empirical rigour being applied to supermarkets must be extended to banking and electricity. Three inquiries into banking have produced rising profits. That outcome is not acceptable, and it should not be normalised.
• Bipartisan and independent inputs: The supermarket debate is healthiest when it is contested, evidence-based, and insulated from electoral cycles. Monopoly Watch urges all parties to engage with the evidence rather than with the lobbyists.

Public policy that runs New Zealand for consumers rather than for incumbent interests is not radical. It is the baseline expectation of a functioning democracy. We urge continued vigour, contested solutions, and the courage to act on what the evidence has long since established.

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