Duty-free monopoly tipped to hit flyers

By Eloise Gibson

Travellers flying from Auckland Airport will almost certainly pay more for duty-free goods under plans to scrap one of two competing stores.

Competition experts the Herald spoke to said it would be unusual if the airport's plans to go from two duty-free operators to one did not result in higher prices.

Auckland Airport announced in July last year that Regency Duty Free would be scrapped when its contract runs out in August next year.

That would leave DFS Galleria as the only operator.

At that time, the airport management said a price comparison procedure would ensure prices remained competitive.

However, Stephen Poletti, a research fellow at the University of Auckland economics department, said the only time a monopoly would save customers money was if there were huge costs savings from not doubling up on services.

That was unlikely to be the case here, he said.

Dr Poletti said any duty-free firm would obviously try to make as much profit as it could.

Removing the competition would boost profits and allow the airport to charge more for its duty-free space.

"The fact the airport wants to do it suggests they must be able to get more rent from a monopoly than from two firms combined," he said.

Dr Steffen Lippert, a senior economics lecturer at Massey University School of Business, also said that Auckland Airport's claim that a single operator would be better for consumers was "strange".

Dr Lippert said unless two competitors were colluding on price, prices would generally go up once there was no competition.

While it was possible a single operator could offer lower prices because of its greater bargaining power with wholesalers, the most likely outcome was higher prices at the cash register.

The Commerce Commission is examining whether the airport's decision is in breach of competition law. It has said that if the experience at Wellington Airport was repeated, Auckland customers would end up paying 10 per cent more for their duty-free goods under a single operator.

A spokesman for the commission said it could not comment while it was investigating the issue.

The airport also declined to comment while the matter is being investigated. Previously, it has listed airports with sole duty-free operators, such as Sydney, Melbourne, Brisbane, Singapore, Hong Kong and Christchurch, to show its move is not unusual.

It said the revamp accompanying the move to one operator would make Auckland a more attractive duty-free shopping destination and give shoppers a broader range of duty-free goods to choose from.

But Consumer New Zealand chief executive Sue Chetwin said even if there were more goods on the shelves under a sole operator, they would all be more expensive.

She said listing other airports that had single operators missed the point.

"For people leaving from Auckland it seems great to have two stores in competition.

"Our view is that, with no competition, consumers will be looking at higher prices."

- NZ Herald

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