Competition

Only free entry into the retail market would tell us if there is enough supermarket competition in New Zealand.

Competition law has been with us since the Sherman Act (1890). But is it still appropriate for the digital age?

If you are concerned about New Zealand’s cost of living, you should think about those regulations that have a limiting effect on supply and competition.

Land regulations are a cost and concern to New Zealand businesses, and they are probably a factor affecting the cost of living through land prices and competition effects.

Politicians play with the price system at their peril. Yet there are minimum wage laws, rent controls, price controls and other ways of distorting prices. Usually introduced with best intentions, these measures prevent markets from working properly.

Whether there is enough competition in the New Zealand retail sector, is hard to tell. First of all, you would need to decide on how to measure it. But one thing is clear: a superficial look just at the number of competitors is not enough to accuse them of anti-competitive behaviour.

To promote competition, the most important things regulators can do is to just let it evolve. Competition does not need encouragement, nor does it need to be mandated. It is just what happens naturally when scarce resources meet unlimited demands. Rainforests do not need gardeners, either.

Antitrust law never really made much sense anyway unless you believe in the possibility of economics textbook style ‘perfect competition’. In the real world, markets are never perfect. But where market entrance is not artificially blocked by regulations, markets are usually dynamic enough to deal with dominant positions on their own.