Adding to the drama, Bayly is now climbing Mount Everest during a Parliamentary sitting. Seriously, being an MP isn’t a bad life – how many private sector employees or public servants after resigning in disgrace get a couple of weeks off in paid company time to “clear his head”, as the Prime Minister expressed it?
And cynics might suggest the Everest trip could have been better assigned to the incoming minister, who could use the vantage point to study the profitability of our banks and supermarkets and their relentless upward trickle of wealth from struggling Kiwi families.
By contrast, during the successful breakup of Telecom, the commerce portfolio was occupied by a succession of political high-flyers consistent with the tough intellectual challenges it presents. Paul Swain and Steven Joyce are examples – also famously David Cunliffe, who according to folklore took a redraft of the Commerce Act away on his Christmas holidays and personally rewrote it. Those were politicians intellectually capable of getting into the details.
But it got worse! A week after his appointment, Simpson recused himself from grocery sector regulation because a close relative of his owns a supermarket. Instead, Willis will handle this challenging piece of work.
Sure, Willis is one of a very few coalition politicians with a genuine empathy for the effect the breakdown of competition is having on those with less than a parliamentary salary, and she has unequivocally committed the Government to action. But that’s a huge ask on top of her finance workload.
It’s worth repeating a few of many nuggets from Willis’ forum speech. She said her top priority was “driving greater competition in banking, grocery and electricity“. In commenting on significant mergers and consolidation across major industries, she noted that “big fish have been swallowing the little fish and regulatory barriers have stopped new fish from entering the pond”.
Willis is a rare minister who understands this issue correctly. It’s not a battle between “businesses” and “consumers”. It’s between, on one side a tiny number of excessively powerful businesses, and on the other many thousands of smaller businesses along with the rest of the community.
“While any super-sized fish have flourished,” Willis added, “in too many cases the Kiwis they sell to have experienced higher prices, poorer choices and a worse deal all round. In my view, law-makers and regulators have been far too complacent about diminishing levels of competition in vital areas – large-scale mergers have been repeatedly allowed in major industries, with so-called efficiency prioritised over the interests of consumers.”
From a finance minister of Willis’ stature, that’s a political turning point. Many people are now looking with expectation that action will follow. In my opinion, the response is simple – lawmakers and regulators have stuffed up so they must now take ownership of the remedies.
So what might happen in the short term? Although in our three-headed coalition almost anything is possible, it’s hard to imagine that Willis’ speech and promises will be left to wither.
In supermarkets, the ideal solution would be an enforced breakup of Foodstuffs and Woolworths to reverse the consolidation that slipped through holes in the regulatory fences – similar to how successive governments dealt successfully with Telecom. The details and the solutions are different, but the hugely successful precedent endures.
Maybe another possibility is consumer class actions. These are becoming increasingly common globally, possibly due to public frustration with the inability of regulatory systems to match the pace at which big business oligopolies are inventing new forms of anti-consumer trickery. Class actions allow for a group of consumers to pool their resources to hold wrongdoers to account.
Here in New Zealand, a banking class action is well under way against the ANZ and ASB banks, alleging that after admitting to breaches of credit laws, they tried to escape by refunding more than 70,000 bank customers affected a small fraction of what the law required.
Any affected customer is automatically a plaintiff and will share in any proceeds. The case is expected to be heard later this year. Consumer NZ has endorsed the action while noting that while such actions have been rare in New Zealand, they are a vital safeguard for ordinary people.
Meanwhile, across the Tasman there’s another consumer class action against grocery giants Coles and Woolworths, based on findings from the Australian regulator that the retailers have made misleading discount claims on hundreds of products over many years. Experts estimate that a typical Aussie consumer could claim back up to A$5000 if the action succeeds.
So could a grocery class action work in New Zealand? Our Commerce Commission, in its widely acclaimed study, estimated the supermarkets have excess profits of $1 million a day. That’s not total profit, which is vastly more – it’s just the proportion of that profit that can be directly explained by market failure. Extrapolated over five years and divided by the number of households that’s an overcharge of around $1000 per family – enough to buy quite a few jars of Marmite. And the $1m a day is just the start.
Could that be reclaimed? Maybe. Thanks to internet banking and loyalty cards it’s pretty simple these days to establish how much you spent at the supermarket over time.
But finally, we rely on our politicians to set the competition rules. Will this government align with the energy and promise reflected in Willis’ presentation? Or will the issue be pushed into the background as “too hard” in a coalition setting?
Be sure there is an energised electorate out there. Willis has clearly identified the issue; the expectations of voters have been raised. Let’s hope real action follows – an unhappy electorate is steaming for action.
Ernie Newman is a semi-retired consultant in Waikato, a former industry advocate in the telecommunications and grocery sectors, and a regular submitter to the Commerce Commission on competition issues. Disclosure – he is supporting the Banking Class Action.
