The ACT Party says National MPs have been coming to them "exasperated" by their own party's policy to break up the supermarket duopoly.
But National's leader is pushing back, saying the policy will be based on a review of the evidence and presents an opportunity for small businesses.
Last week, National promised to split Pak'nSave from New World and Four Square, subject to an independent Commerce Commission assessment of the plan, which echoes one put forward by New Zealand First back in April.
Meanwhile, Labour is promising to outlaw price-gouging for a range of essentials and to split up Woolworths and Foodstuffs' retail and wholesale businesses, while the Greens have vowed to force Woolworths and Foodstuffs to sell some of their stores and wholesale operations to the government.
ACT leader David Seymour called it a "race to the bottom… to beat up the supermarkets the most".
While acknowledging "clearly things are more expensive", he told RNZ's Morning Report it was not clear supermarkets were making excessive profits nor that any of the proposed solutions would make groceries cheaper.
"The most important question is well what else will these policies do? And the effect on New Zealand business, both inside and outside the country, people's willingness to invest and innovate - which by the way, is what we actually need if we want higher wages and a more affordable life - is terribly chilling.
"Because once you start with one industry, the first question is who's next?"
The Woolworths-Foodstuff duopoly has an 82% market share. The government's efforts to attract a third nationwide chain have so far come to naught, though US bulk discounter Costco opened its first New Zealand store in West Auckland about four years ago, and has plans for more.
Seymour said Costco only agreed to come here when it was granted a five-year exemption to new rules requiring supermarkets to supply other retailers at wholesale prices.
"They said if that's the rule in New Zealand, 'We're out.' So they were given an exemption from that. And I think that nicely illustrates that regulatory uncertainty and exactly the kinds of policies that every other party is now proposing in a kind of hysteria to be seen to be the toughest beating up on one sector, actually can drive away exactly the kind of investment that we need."
Seymour questioned if any of the parties proposing radical solutions were "absolutely sure" they knew "what the right market structure is for groceries in an island nation of 5 million people spread along a mountain chain at the end of the world's supply chain".
"We've been doing this in New Zealand for too long. I mean, Jacinda [Ardern, former prime minister] said we're being fleeced by the petrol stations, we had to go with the farmers for a while, landlords were the baddies at one point, so we put more taxes and regulations on them. The banks have been in for a good beating, now it's the supermarket.
"There's only 5 million of us, guys. We've got to stop and actually start asking, well, how do you get the kind of investment and innovation that leads to more competitive offerings, higher wages and better prices?"
Seymour said there had been an "unprecedented wave of National MPs" - at least five, that he knew of - which had approached ACT with concerns about their own party's policy.
"We can understand the Green Party - they always want to do crazy stuff, but the National Party for a long time has given people reassurance that this is a place where you can actually own something, and if you do a good job you can sell and maybe even make a profit - but not always.
"It's hard enough to do business as it is in any country without worrying if your own government's going to attack you."
'Massive opportunity' for small businesses - Luxon
Nearly 500 owner-operators of Foodstuffs supermarkets signed open letters to National leader Christopher Luxon expressing concern about the policy.
Asked if he expected such a pushback from businesses, Luxon said his policy was "not about business, it's actually about the fact that we believe in competition".
"We are very pro-business and we're also pro-competition. And actually, the owner-operators, the 400-500 that are in that Foodstuffs group, are incredible.
"It's actually a sector I worked in for 18 years... I can't think of a single [other] market that has 82% market share with two players. I mean, other 5 million people countries I operated in around the world would have three to five operators, typically.
"It's a market in New Zealand that has a 4% margin. I mean, many countries around the world would have 1.5 to 2%... there's an excess profit being made every day, and it's about then not just jumping to a populist easy answer."
He said politicians should not be "going off and intervening in a market like this in an ad-hoc way".
"We're now handing it over for six months to the Commerce Commission, with all of their economists, with all their deep competition experts... if it is [the right way forward], we move forward with it. It may well be that Foodstuffs decides to do it voluntarily. It may well be that we have to mandate that happening... if [the Commission] decide not to do it, then we won't be doing it."
Luxon pleaded ignorance of National MPs calling for Seymour to stop the policy.
If returned to govern, the party says it will divvy up grocery giant Foodstuffs – with Pak'nSave a separate entity. (Source: 1News)
"I'm not aware of that. I'm just saying to you, caucus backs the policies. MPs will have concerns as they do on all our policy areas, and we discuss those and we raise those in our caucus meetings, as we should."
He said different reports suggested different gains, with some pointing to a 3.5% reduction in grocery prices in a year, and others 5% lower after six years.
The change could be an opportunity for small businesses, he suggested.
"You could, for example, see owner-operators starting to have two stores or more stores, they could create new formats... for many small businesses across New Zealand, who want to provide products and services into the supermarkets, this is a massive opportunity."
Labour's proposed fix
Labour commerce and consumer affairs spokesperson Arena Williams told RNZ's Morning Report breaking the wholesale dominance the duopoly has over smaller retailers was key to bringing down prices.
"The two major grocers have locked in their market power with not only suppliers but with small grocers as well, by dominating the market not only in retail but also in wholesale. We're going to stop that."
If elected, the party would force Foodstuffs and Woolworths to break up their retail and wholesale supply operations. (Source: 1News)
The Commerce Commission's market study in 2022 recommended against this separation.
"What they identified with that model was that there were two problems with it," Williams explained, saying Labour's new plan - three years in the making - fixed those.
One was a "guaranteed route for retail grocers to be able to access from the wholesalers [without] relying on the wholesalers themselves to come up with the solution within their own businesses that would allow for that".
"And they also identified some problems with the way that supplies are bought essentially by only two buyers with huge market power over them. We've also fixed that… That's what's taken us three years, but we're certain that this is the model which won't see prices rise in the short-term, like the one proposed by National, and it's the one that's best understood by the market, so we can get underway quickly."
Another plank of Labour's policy is to ban price-gouging.
"Anyone who is price gouging will need to stop that," Williams said. "There is evidence in the Commerce Commission's market study in 2022 that supermarkets were making excess profits of $1 million a day. Within that, there will be prices which are higher than they would otherwise be in a competitive market.
"The Commerce Commission gave that evidence to [the] government and [Finance Minister] Nicola Willis has sat on it for three years and not taken action while New Zealanders cannot afford to put food on the table. We're saying this is serious, and that's why we're introducing a serious law which has big punishments for anyone who is price gouging."
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