Strong regulation needed to counter supermarket price gouging - marketing expert

By RNZ

Supermarket price gouging should be countered with strong regulation in the same way as public utilities are controlled, according to a marketing expert.

The Commerce Commission draft report into the grocery industry has highlighted the stranglehold of Woolworths and Foodstuffs on the sector and the lack of competition, high prices for consumers, and pressure on smaller suppliers and retailers.

The commission suggested more competition would drive down prices, but a senior marketing lecturer at the Otago Business School, Robert Hamlin, said the entry of a third big supermarket would make little difference, as demonstrated in larger countries, where there were more market players.

"Most of the other oligopolies that operate around the world and operate with three, four or five, maybe half a dozen big players, [it] doesn't really seem to address the problem.

"Rather like a power company, they're essential to modern living, and it's important that they should be regulated to make sure that they actually do deliver," he said.

Hamlin said the margins on all grocery items should be regulated, which would cap the profits made by supermarkets.

"That would actually cause fresh meat and fresh vegetables to be considerably cheaper, particularly when they're in season, and would cause some other products to be significantly more expensive, like sugar."

Hamlin said the supermarkets were making a 20 per cent return on their capital, which was excessive.

"Probably the only way you could really change the behaviour of these big oligopolistic cartels at retail is to regulate them as a public utility."

However, he said the sector should be a direct responsibility of a senior government minister, rather than a standalone regulator.

"I would imagine there will be a call for an independent regulatory authority... that would be a very poor idea because I doubt if it would stay independent for very long - that it would be captured by the people it's supposed to be being regulated by."

The Warehouse Group, which offers some grocery items, and toyed with the idea of hypermarkets to take on the supermarkets 15 years ago, said it backed the Commerce Commission report and would look at it closely.

"While we are yet to look at the detailed findings of the study, we would support some form of intervention to drive greater competition in the sector," it said in a statement to RNZ.

"We will also be considering what role we can continue to play in providing affordable goods for New Zealanders."