SpeechHon MICHAEL WOODHOUSE (National): Thank you Madam Speaker. There is quite a bit to agree with the Minister on in his second reading speech. There are systemic issues in the sector and it has been created by what is generally agreed to be a lack of competition in the grocery market. And I agree with him when he says we do need to be more competitive and have an even playing field. But I think it's worth bearing in mind why we are where we are. And that is because we have a duopoly and we have a duopoly because the Commerce Commission under the previous Labour Government 22 years ago allowed the purchase of Woolworths by Progressive Enterprises Ltd in what I thought then—and continue to maintain—was one of the dumbest decisions ever made by the Commerce Commission. They've made a few in that time—the purchase by Southern Cross Healthcare of Aon Insurance for medical insurance also substantially reduced competition in that market. But competition exists because there are more players not fewer. That's why we have the Commerce Act. Actually the Commerce Act has in my view endured for many many years—37-odd years since it was passed—and those key points on restriction of competition sections 27 and 36 I think are pretty enduring and well written. But what it needs is a competition watchdog with teeth. And I have to say in my experience—and certainly we're talking nearly a generation ago—there were decisions that were made that in large part led to the situation we find ourselves in. And it's easy to see when we compare ourselves with other OECD countries. There is a very very high correlation between the number of players in the grocery market and the extent of competition in those markets. And we are in an inflationary environment. It's not only for that reason. We've had weather events that have caused seasonal supplies to grow in cost and therefore price. We are in the middle of an inflationary cycle that I attribute much of Government decision-making to and that's not controllable necessarily by the grocery markets. But had we had more competition then we may not have had the degree of inflation in our groceries that we are seeing.But the Minister talked about tools in the toolbox as if one can hammer markets into submission that they can regulate them into lower prices. And we'll see because this bill will pass and it will pass with the support of the National Party but I do have serious concerns about the degree to which this will have any material beneficial effect until we broaden competition.Damien Smith: Why pass it then?Hon MICHAEL WOODHOUSE: That's a very good question Mr Smith and it's one that my party has considered very carefully. And on balance and on the basis that to the degree that there are marginal improvements we will continue to support this. But I say this: when we get to Government and if we see that this is not working to the degree that it should and the lofty rhetoric that the Minister has just waxed there will be changes to it because we need there to be greater competition—in all markets not just this one. In terms of anecdotes to stress the degree of market power that some of these players have I remember some years ago when the previous Government was considering its response to the Law Commission report Alcohol in Our Lives and one of the things that was being considered at that time was a material increase in alcohol excise as a way of moderating using price as a signal to moderate behaviour. And I was at a function where a relatively senior member of an organisation in the alcohol industry relayed a conversation that he had had with one of the major players in the grocery sector that said simply this: If the Government puts an alcohol excise on the price of beer and wine that cost comes off your margin not ours and if you don't like it we just won't stock that product."And that was the degree of the strength of the belief of the influence that the grocery sector had on that one supply chain one product—that if there were cost pressures then that was just going to be borne by the supplier. Mr Bayly started to touch on margins. I think it's important to recognise that size has benefits for consumers potentially because that purchasing power does enable bulk purchase and lower prices. What I'm not sure is happening is whether or not the consumer ultimately benefits when there's only two or three major players in the market. Indeed the committee—of which I wasn't a member when the submissions were being heard; I was a bit of a tail-end Charlie coming on to the Economic Development Science and Innovation Committee—looked very carefully at some of the frameworks for wholesaling in that supply chain. I think that supplier code is going to be very important as it relates to the degree of transparency about margin management and I'll be watching that very very closely. I think the other thing that we heard—not so much during the consideration of the bill but it was certainly an issue that was raised in the context of the Commerce Commission's work before they published their final report and that was the extent to which we make it harder for overseas investors to introduce grocery chains into New Zealand. I think the Overseas Investment Act and the Overseas Investment Office may be a barrier to increasing competition. The very thing that we are trying to do is actually being prevented by what I believe to be overly restrictive barriers in place on foreign investment into a number of sectors but certainly this one. When you're thinking about some of the big international chains like ALDI like Costco they've had a look at New Zealand and it's simply just too hard for them at the moment. One of the litmus tests of the effectiveness of this bill when passed is going to be the degree to which those major global chains suddenly see New Zealand as a more attractive destination to invest. If they don't or if they can't then we will fail to achieve the lofty goals that the Minister set out: more competition and an even playing field. The areas again that Mr Bayly did mention and that I think are going to be as effective as anything that we're doing in this bill are certainly the removal—and indeed it is happening voluntarily now I think. Supermarket chains may have seen the writing on the wall in respect of land acquisition covenants and restrictive lease covenants. They are simply barriers to competition. I think we've all got stories of examples in electorates up and down the country where the Resource Management Act was frankly used as a tool to delay and deny and defer and deflect the ability of competition to come in to the market. It's certainly been the case that I could think of in two areas that I know very well Dunedin and Central Otago. Thankfully tenacity prevailed but it shouldn't have to. This is one of those areas where we actually encourage and welcome the sorts of competitive endeavour that will I hope be improved by this.The last thing I would say—and I think I'll just come back to the grocery supply code—is that sunlight is such a great disinfectant. One of the things that I think the supply code needs to do is to highlight the degree to which there are elements of pure competition versus pure collusion. One of the things that commodity products like oil like petrol for example and to some degree groceries—because they are the same product being sold in two different places; two three or four different places—is that absolute competition moves in the same way as a collusive environment and it's really hard to tell the difference. When Z change their price up or down 10c a litre suddenly BP do the same. Why is that? Because of competition or collusion? Well we'd like to think it's because of competition—that there aren't phone calls going on in the background. One of the things the grocery code I think will enable the commissioner to do is to actually highlight and shine a light and make more transparent the practices that go on in terms of price setting and margin management. So with a reasonable amount of caveats we'll continue to support this bill at second reading."