OPINION:
Commerce Minister David Clark's bombshell announcement that he has "not ruled out going further than the options the Commerce Commission tabled" in dealing with the supermarket duopoly will have had consumers cheering in the aisles this week.
Compulsory divestment or something equivalent was always the holy grail to those seeking change.
It's unlikely the government will retreat now after once again raising expectations, especially as Clark's message was reinforced by the Prime Minister. The political damage would be unthinkable.
That's huge news.
For those agitating for action, its been a roller coaster ride. The Commission in its draft Report raised expectations by flagging that it might require one or more existing chains to sell off part of its business to a new entrant, only to dash these with its final Report last month. Now the Minister has put the divestment option back on the table in dramatic style.
But while it may seem odd for the regulator to table the "nuclear option" and then back away, there are two precedents in its regulation of telecommunications in the 2000s.
First, in its work on "local loop unbundling" – the requirement in those days for Telecom to allow competing providers access to its copper residential lines.
The Commission released a final Report in 2003 which made a compelling case to unbundle, but a lame recommendation not to do so because of the costs and difficulties of that solution. After a regrouping of the forces wanting unbundling, the government of the day set aside the recommendation and proceeded with unbundling, to the lasting benefit of the telecommunications industry and its customers.
Second and more recently on mobile phone termination rates – a complex issue that was putting hundreds of millions annually into the pockets of the two incumbents while keeping new entrant 2degrees out of the market. The Commissioners reached a split decision on the issue - two were against, and one in favour.
To its great credit, the Government of the day ultimately supported the minority view and outlawed this reprehensible practice.
So it looks as though David Clark has learned from the past, which is great for Kiwi shoppers.
But it raises a question - why has our Commerce Commission a history of coming so close to the victory line and then backing off, leaving it to the government to complete its job?
Big businesses have a natural desire to consolidate and benefit from the market power they derive. Groceries aside, think about Facebook, Google and others in the technology space. Closer to home our small market makes us very susceptible to market power abuse – look at banking, fuel, and building products as examples.
Competition regulators are an essential part of the structure of a modern economy. They are a protection for buyers against undue concentration of sellers – in a sense they protect capitalism from itself.
The regulator across the ditch is the Australian Competition and Consumer Commission, or "A-Triple-C." Compared to our understated Commerce Commission it has a high public profile.
Its incoming Chair recently described it as the second most important financial institution in Australia behind the Reserve Bank. Successive Chairs have been forthright, outspoken, in the face of the public, and very focused on doing what's right for consumers.
Our Commission is not quite there yet. Its research and investigation work is exemplary – its 517 page final report on the grocery sector is among plentiful evidence of this.
But when it comes to making the really big calls like unbundling or compulsory disinvestment, it shies away at the last minute.
Perhaps as an institution, it doesn't feel it has the mandate to make really courageous calls?
Perhaps it feels too heavily the weight of the big end of the business community – it's no secret that Business New Zealand and the Commission are not great buddies even though the Commission's work is of huge benefit to our small and medium-sized businesses.
Maybe our limited number of competition lawyers, and the revolving door of career opportunities, is a factor? If a commissioner's next career aspiration is to join one of the giant law firms, having just dismembered one of their biggest clients may not be career-enhancing.
Whatever the reason, our Commerce Commission needs to assume for itself, and be accorded by others, the respect of a competent and highly capable agency unambiguously focused on the interests of consumers.
Maybe we should learn from the Aussies and add the word "Consumer" to its title? With critically important work on the agenda in other industries, there would never be a better time.
However this plays out, thanks are due to Minister Clark for joining several illustrious predecessors in coming to the rescue. Let's hope he follows up next month with a courageous decision. Cheaper hot cross buns this time next year would be a good barometer of tangible progress.
Ernie Newman is a Waikato-based consultant who has worked in many business organisations over more than 40 years including within the telecommunications and grocery sectors. He has advised a number of clients including the Food and Grocery Council, but the views in this article are his own.