Is the Commerce Commission for consumers or suppliers

Max Salmon writes:

Last week the Commerce Commission announced its concern with a proposed merger between Foodstuffs North Island and Foodstuffs South Island. Their concern is a decrease in competition in the market.

It sounds crazy when you first hear it, but it’s even weirder when you see what the Commerce Commission is actually worried about.

At first glance it’s ludicrous. It isn’t like there are vast numbers of inter-island shoppers, ferrying and flying between north and south to secure precious grocery bargains from the New World on the other side of the Strait. Price differences between Tauranga’s PAK’n’SAVE and Dunedin’s New World won’t lead to many shopping trips.

It does indeed seem ludicrous. I won’t travel to another suburb for cheaper prices, let alone another island!

But that isn’t what the Commerce Commission is worried about. They worry instead that the combined entity will be too efficient. It will be able to purchase in bulk for both islands, passing some savings along to consumers, and making life harder for their suppliers.

So the Commerce Commission is worried about a merger than might result in lower prices for consumers!

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