Breaking up the supermarkets is hard to do... and a bad idea

The National Party’s proposal to break up New Zealand’s supermarket duopoly lacks robust economic justification and risks undermining property rights. While political leaders cite a Sense Partners report to support structural separation, the analysis remains preliminary and requires extensive sensitivity testing regarding store viability and consumer welfare. Current market concentration stems largely from regulatory barriers—including restrictive zoning, complex alcohol licensing, and rigid product labeling—rather than solely from anti-competitive behavior. Addressing these underlying constraints would more effectively foster competition than forced divestment. Furthermore, implementing such a drastic intervention based on political expediency sets a concerning precedent for sovereign risk, potentially inviting future government interference in other sectors. If this policy fails to lower prices, it risks triggering a cycle of populist measures, such as price controls or state-owned alternatives, rather than fostering a truly competitive, market-driven environment.