The Warehouse – common sense prevails

The decision of the High Court to overturn the decision allowing either Foodstuffs or Progressive to buy a controlling stake in The Warehouse is a sensible one.

The original decision was largely based on the evidence of the three main parties, The Warehouse who wanted to cash up their shares and didn’t give a stuff who bought them as long as they got top dollar (no problem with that), Foodstuff and Progressive who both wanted to ensure that the potential competitor was shut down as soon as possible.

The grocery side of The Warehouse has not done all that badly and it was odd to see the company claim it wasn’t doing well, when the evidence was that in fact although it had got off to a slow start it was starting to show some success, and this is precisely why Foodstuffs and Progressive were desperate to shut it down.

There is no doubt that if it is successful this new grocery entrant will provide some welcome competition to the duopoly that operates between the two supermarket chains. We need to have some competition because while there is no evidence of any collusion between the two main players, evidence overseas shows that it is difficult for big players to resist the urge to have the odd off the record meeting on key ‘commdity’ pricing to their mutual advantage.

I’m not suggesting that this will see prices drop across the board, but it will see the possibility of a genuine third party enter the supermarket business (assuming The Warehouse now sell to someone else) and this can only be good for both consumers and suppliers long term.

It will be interesting to see whether this is appealed, Foodstuffs and Progressive are deadly serious about ensuring their market position remains unchallenged so if there is a slightest chance it is likely they will take it.

The Commerce Commission says a decision by the Court of Appeal overturning the High Court decision on ownership of The Warehouse Group Ltd is a victory for supermarket consumers and competition in markets.

http://www.comcom.govt.nz//MediaCentre/MediaReleases/200809/warehousedecisionavictoryforconsum.aspx

http://stuff.co.nz/4638140a13.html

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