(Image: Getty)
(Image: Getty)

The BulletinOctober 2, 2024

Foodstuffs merger declined, so what happens next?

(Image: Getty)
(Image: Getty)

ComCom was worried about the possible impacts on competition and consumers, writes Stewart Sowman-Lund in today’s extract from The Bulletin.

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Foodstuffs merger declined

Yesterday morning, reported The Post’s Tom Pullar-Strecker, it was confirmed that the Commerce Commission had declined the application for Foodstuffs’ North and South Island branches to merge into one entity. In comments yesterday, the commission said it was worried that Foodstuffs’ proposal would have had impacts on competition and consumers. “The proposed merger would result in a permanent structural change to the New Zealand grocery industry,” said commission chairperson John Small.

That’s similar to how smaller players in the market felt, reported Aimee Shaw. The New Zealand Food and Grocery Council said that the commission’s decision recognised “the very real concerns of both suppliers and consumers that have been clearly articulated and supported by evidence in the three rounds of submissions and cross-submissions”.

Is this the end of the road?

Foodstuffs has consistently maintained that its merger would not have dampened competition and claimed instead it would have meant cheaper prices at the checkout. “What would change is the way we’re governed and operated,” Foodstuffs’ South Island chairperson Russell McKenzie previously claimed. Shareholders – that being store owners – agreed, and voted in favour of the merger. But it was always going to need to pass the hurdle that is Commerce Commission approval.

The watchdog has, under the Commerce Act, the power to enable or reject proposed business mergers based on whether it will “substantially lessen” competition in a market. In an interesting (paywalled) piece for Newsroom Pro, Andrew Bevin looks at how the commission’s latest decision diverges from prior merger rulings by focusing on the “upstream” effects – namely the companies that supply groceries to Foodstuffs.

Foodstuffs is now weighing up its next move and will consider appealing the commission’s ruling, reported Will Mace for the NBR (paywalled). In analysis for the Herald (paywalled), Kate MacNamara argued that it would be surprising if Foodstuffs walked away quietly. “The companies have been hatching the merger plan for several years, and their respective boards have given it considerable time and effort, as has [Foodstuffs North Island chief executive Chris] Quin, who has promoted it as an effort to wring greater efficiencies from the businesses and improve food and grocery prices for customers,” she noted.

Quin said the commission’s decision yesterday amounted to a “press release” and Foodstuffs would be waiting for the full detail to be made public on October 23.

It’s part of a bigger picture

It was always going to be an uphill battle in the current environment. Against the backdrop of the proposed merger, Foodstuffs and its main rival, Woolworths, have been fighting a number of fires on the competition front. Earlier in the week, the North Island branch of Foodstuffs was fined $3.25m for anti-competitive land covenants imposed to try and hinder rivals from opening or expanding stores, reported the Herald’s Anne Gibson. Meanwhile, a few weeks ago, the first annual report into competition in the grocery sector painted a “concerning picture”, explained Stuff’s Brianna McIlraith, finding ongoing dominance by the two large players.

But while Foodstuffs appears unlikely to give up the battle, another suggestion has been floated from an Australian academic following the saga. In comments to the NBR (paywalled), Sydney University researcher Lisa Asher said that Foodstuffs should consider divesting some of the brands operated by the business to encourage locally owned competition in the wider market. Some in Australia have also recently suggested Woolworths sell its New Zealand arm, though that’s less about competition on our shores and more about the brand’s performance across the ditch.

What is the government’s role here?

The Spinoff’s Toby Manhire recently summarised several areas that it appears the coalition parties in government have diverging views on. One that could be added to the list is supermarket competition. Both the PM and National commerce minister Andrew Bayly were quick to welcome the grocery commissioner’s recent report and, reported The Post, appeared in favour of the need for further regulation. But Act’s David Seymour disagreed, reported RNZ’s Craig McCulloch. “It’s pretty clear what Act’s position is: we need less regulation and more competition.” It has echoes of the recent decision by the government to allow buy now, pay later schemes to avoid certain regulation, with the Herald’s Jenée Tibshraeny (paywalled) floating the possibility that Seymour could try and get his way with supermarkets too.

Keep going!
The recent announcement about Dunedin Hospital is yet another reason people in the South Island might have beef with decision-makers up North. (Image: Anna Rawhiti-Connell)
The recent announcement about Dunedin Hospital is yet another reason people in the South Island might have beef with decision-makers up North. (Image: Anna Rawhiti-Connell)

The BulletinOctober 1, 2024

Hospital call adds insult to injury for ‘forgotten’ South

The recent announcement about Dunedin Hospital is yet another reason people in the South Island might have beef with decision-makers up North. (Image: Anna Rawhiti-Connell)
The recent announcement about Dunedin Hospital is yet another reason people in the South Island might have beef with decision-makers up North. (Image: Anna Rawhiti-Connell)

It’s been a long-standing catch-cry, but the 35,000-strong march in Dunedin suggests the South is done with being ‘forgotten’ and will remember, writes Anna Rawhiti-Connell in this excerpt from The Bulletin, The Spinoff’s morning news round-up.

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The ‘forgotten’ south

“[Insert party or current government] has forgotten about [insert region]” is a recurrent political diss track. Labour leader Chris Hipkins accused the current-day government of forgetting about the South Island in July. Act leader David Seymour said the same of the then Labour government in December 2022, pointing out that of the “top 10” cabinet ministers, only two were from the South Island. Matt Doocey is the only minister inside this government’s current cabinet from the South Island.

Cantabrians have maintained a steady“forgotten about” drumbeat since the earthquake in 2011. Before the news about Dunedin hospital, the government’s National Land Transport plan was the focus of cries of unfair resource allocation in the South Island.

ODT front pages September 27 and 30 (credit: Otago Daily Times, People Power photo: Stephen Jaquiery)

Orchestrated effort brings 35,000 out to march

Following the announcement last week that the government may downgrade Dunedin’s proposed new hospital to keep it within its current funding appropriation, all forces rallied to make sure the voice of Dunedin was heard. The ODT has been doing what a local print masthead does best at times like this, running two incredibly strong front pages.

As The Spinoff’s Tara Ward notes in this brilliant on-the-ground report from Sunday’s protests, the Otago Regional Council put on free buses to make travel into the city centre easy. The Dunedin city council is at the forefront of the “They save, we pay” campaign, leading the way with a protest song sung to the tune of the old Carisbrook anthem, “Welcome to the house of pain”. An estimated 35,000 people turned out to march on Sunday, making it clear they believe the government has broken an election promise. By comparison, one of the biggest protest marches in this country’s history saw an estimated 40,000 people marching in Auckland to protest the government’s proposal to mine on conservation land in 2010.

What now?

RNZ has a great explainer and timeline on the Dunedin hospital rebuild project to date. Both health minister Dr Shane Reti and Prime Minister Christopher Luxon have said they understand the frustration and remain committed to delivering “a good hospital for the people of the South”. Luxon reiterated yesterday that it must remain within budget, with a “blow out” figure of $3b cited. The project is to be delivered within its current appropriated budget ($1.88b), and urgent advice is being sought to ensure that happens.

Dunedin mayor Jules Radich told RNZ the $3b figure was an exaggeration and that “They’ve included in that things like carparking and pathology and other services that were never in this scope, and were taken out of the scope two years ago.” He called the report commissioned by the government on costs a “smokescreen” and said the fightback is just beginning.

While Dunedin is a Labour stronghold, the area the hospital serves as a tertiary healthcare provider extends beyond Dunedin’s red borders and spills into the huge Southland electorate, which, amid electoral boundary reshuffles, has remained a National stronghold. To the north, National’s Miles Anderson holds Waitaki. Clutha District mayor Bryan Cadogan is joining Radich in the pushback on the figures being cited, telling RNZ’s Checkpoint last night that he wants the government to “show us the figures”.

West Coast, Timaru, Picton and Invercargill also have beef

In addition to protests in Dunedin, West Coast residents took to the streets in Westport on Saturday to protest against the region’s “dire” lack of health care services.

In Timaru, workers at the Alliance Group’s meatworks learned about a proposal to close the Smithfield processing plant, affecting about 600 staff. Federated Farmers is blaming land use changes. Minister for rural communities Mark Patterson said it was “pretty foreboding” for Timaru and the surrounding districts. “It’s really concerning; it’s a wake-up call. We as a government have got to take this seriously,” he said.

No mention was made of a plan for the Interislander ferry in the government’s plan for the fourth quarter released yesterday. After the iRex plan was cancelled in December, the decision was described as a shock to people in Picton.

Topping off a batch of bad news yesterday was Air New Zealand’s announcement that it would cease direct flights between Wellington and Invercargill in January. Travellers will now need to stop in Christchurch, adding 35 minutes to the trip, casting the productivity gains being cited around removing blanket speed limits on our roads in a slightly different light.