Competition is the force that keeps prices honest, drives businesses to improve, and ensures consumers get genuine value for their money. When it works well, it is largely invisible — prices are fair, quality improves, innovation happens, and no single company can exploit its customers without losing them to a better alternative. When it breaks down, the consequences show up in grocery bills, mortgage rates, fuel prices, and the choices — or lack of them — that New Zealanders encounter every day.
New Zealand has a mixed record on competition. In some sectors it works reasonably well. In others — particularly grocery retail and banking — concentrated markets with a small number of dominant players have produced outcomes that regulators and governments have increasingly concluded are not working in consumers' interests. Understanding how competition is supposed to work, where it breaks down, and what is being done about it is essential to understanding some of the most contested economic debates in New Zealand today.
What Competition Does and Why It Matters
Competition between businesses for customers drives a chain of beneficial outcomes. Businesses that want to win and keep customers have to offer good prices, high quality, and responsive service — or lose those customers to a rival. That pressure to perform is what keeps markets efficient. Without it, businesses can charge more, invest less in quality and innovation, and earn profits that reflect market power rather than genuine value creation.
The benefits of competition compound over time. In competitive markets, innovation tends to be faster — businesses look for better ways to serve customers to get ahead of rivals. Productivity tends to be higher — inefficient businesses lose customers and eventually exit. Prices tend to be lower — the threat of losing business to a cheaper competitor constrains what any single firm can charge.
The costs of weak competition also compound. A market dominated by two or three players that do not aggressively compete for each other's customers can sustain prices and profit margins above what a truly competitive market would allow — for years or even decades. The difference comes directly out of the pockets of consumers, businesses, and the economy as a whole.
For New Zealand, the stakes are particularly high. As a small, geographically isolated economy, many markets naturally tend toward concentration — there simply may not be enough customers to support more than a handful of viable competitors in some sectors. That geographic reality makes good competition law and active regulatory oversight more important here than in larger economies where natural market forces are more likely to keep concentration in check.
The Commerce Commission: How Competition Is Enforced
New Zealand's competition law is centered on the Commerce Act 1986. The Commerce Commission — an independent Crown entity — is responsible for enforcing it. The Commission's role covers three main areas: enforcing prohibitions on anti-competitive conduct, reviewing mergers and acquisitions that might substantially lessen competition, and conducting market studies into sectors where competition may not be working well.
Anti-competitive conduct prohibited by the Commerce Act includes price fixing — agreements between competitors to set prices at a particular level — and other cartel behavior, misuse of market power, and restrictive trade practices. These are treated seriously: criminal penalties apply for cartel conduct, and civil penalties for other breaches can be substantial.
Merger control requires businesses to notify the Commerce Commission of significant mergers and acquisitions, which the Commission reviews to assess whether the combined entity would have substantially less competition in the relevant market. Mergers that would reduce competition are either declined or approved with conditions.
Market studies are a more recent and increasingly important tool. The Commission can conduct in-depth investigations into sectors where competition may not be working well — examining industry structure, barriers to entry, pricing behavior, and consumer outcomes — and make recommendations for regulatory or structural change. Market studies do not result in enforcement action but can lead to significant policy and legislative change.
The Grocery Duopoly
New Zealand's grocery retail market is the most visible and contentious example of weak competition in the country. Woolworths New Zealand and Foodstuffs — the cooperative that operates New World, Pak'nSave, and Four Square stores — together hold around 82 percent of the grocery market in a sector valued at $25 billion. New Zealand consistently ranks among the most expensive countries in the OECD for grocery prices, and the profitability of the two dominant chains has been notably high by international standards.
The Commerce Commission's market study into grocery retail, published in 2022, found that competition was not working well for consumers and made 14 recommendations for improvement. The government accepted 12 of them and passed the Grocery Industry Competition Act, which established a Grocery Commissioner within the Commerce Commission, introduced a mandatory Grocery Supply Code to govern how the major supermarkets deal with suppliers, and created a framework for wholesale supply to allow smaller retailers to access grocery products to compete.
The Commission's first Annual Grocery Report, released in 2024, painted what the Grocery Commissioner described as a concerning picture — with increasing retail margins, continued high profitability, and no significant improvement in market competition. The wholesale supply inquiry that followed found that the major supermarkets' wholesale offers were having limited impact and that the range and pricing of goods available to smaller retailers were not consistent with what a competitive wholesale market would produce.
By early 2026, the government was pursuing a parallel set of competition reforms — including new predatory pricing measures to be introduced through changes to the Commerce Act, fast-track consenting for new supermarket development, and a request for information process to identify barriers that were preventing new entrants from building and operating at scale. The Commerce Commission had also warned Woolworths for what it believed was a likely breach of the Grocery Industry Competition Act in relation to its supplier delisting processes. The possibility of structural separation — breaking up or separating elements of the major supermarkets' operations to create more competitive conditions — was being actively considered at ministerial level.
Banking: A Stable Oligopoly
New Zealand's personal banking sector is dominated by four large Australian-owned banks — ANZ, ASB, BNZ, and Westpac — which together hold an overwhelming majority of the market for home loans, savings accounts, transaction accounts, and credit cards. Kiwibank, the New Zealand-owned government bank, provides some competition but has historically lacked the capital to be a consistently disruptive force.
The Commerce Commission's market study into personal banking, published in August 2024, found that New Zealand's four largest banks operated as a stable, highly profitable oligopoly with no disruptive maverick and a lack of obvious or aggressive price competition. The Commission found that competition between the majors was sporadic — triggered by events like interest rate changes rather than sustained price-beating behavior — and that consumers were missing out on better prices, more innovation, and genuine choice.
The government accepted all 14 of the Commission's recommendations and committed to implementing them. Key measures include developing open banking — a framework that allows consumers to securely share their financial data with third-party providers like fintechs, enabling new forms of competition and innovation — with a target of being fully operational by mid-2026. The Customer and Product Data Act, passed in 2025, established the legal framework for open banking, with the four major banks required to provide open banking access from December 2025. Kiwibank is also being explored as a potential disruptor — with the government examining capital-raising options that would allow it to scale and compete more aggressively with the major banks.
The Finance and Expenditure Committee's inquiry into banking competition, which reported in August 2025, reinforced the Commission's findings and made 19 further recommendations, all of which the government agreed or partially agreed to in November 2025. The direction of travel is clearly toward more active intervention to improve banking competition — including reducing regulatory barriers for new entrants, improving switching processes for consumers, and requiring greater transparency in pricing and product terms.
Building Materials: The Cost of Construction
A third sector where the Commerce Commission identified serious competition problems is residential building supplies. The market study into building materials, commissioned in 2021 and reported in 2022, found that New Zealand's building supply sector was characterized by high concentration, limited competition, and prices significantly above those in comparable countries.
Plasterboard, concrete, steel, and other critical building materials were found to be supplied by a small number of companies — in some cases near-monopolies — with limited competitive pressure and high barriers to new entry. The consequences show up in New Zealand's high construction costs, which make housing more expensive to build and constrain the supply of new homes at affordable prices.
Reforms following the study have included changes to make it easier for new suppliers to enter the market and for builders to use alternative products that may have been effectively excluded by incumbent suppliers' dominance of distribution channels.
How Competition Affects Everyday Life
The state of competition in markets shapes everyday life in ways that are not always visible but are financially significant. A family paying $300 a week in groceries in New Zealand might be paying meaningfully more than a family in a comparable country with a more competitive grocery market. A first home buyer's mortgage rate reflects, in part, whether the banks they approach are genuinely competing for their business or operating in a market where competition is sporadic and margins are protected.
The electricity market, petrol retail, telecommunications, and domestic aviation are other sectors that have attracted scrutiny over competition. The Commerce Commission assessed the domestic airline market in early 2025 — a market dominated by Air New Zealand — to determine whether a full competition study was warranted. Telecommunications has seen significant regulatory intervention to improve competition in broadband, with the separation of Chorus — the infrastructure company that owns most of New Zealand's copper and fiber network — from the retail providers that use it, designed to prevent a single company from having both network ownership and retail advantage.
The Commerce Act Reforms
The government has been pursuing a broader reform of New Zealand's competition law through a targeted review of the Commerce Act. Changes under consideration include strengthening the prohibition on misuse of market power — making it easier for the Commerce Commission to act against dominant firms that engage in behavior designed to exclude or harm competitors — and introducing more effective tools against predatory pricing.
New predatory pricing measures, expected to be introduced through changes to the Commerce Act in 2026, would give the Commission an objective economic test to apply when assessing whether a dominant firm is using sustained aggressive pricing to drive smaller competitors from the market. This reform is significant because predatory pricing — where a dominant firm temporarily prices below cost to eliminate a competitor, then raises prices once the competitor is gone — is difficult to prosecute under current law.
The Tension Between Efficiency and Competition
One of the genuine complexities of competition policy is that concentration is not always bad. Sometimes large businesses achieve lower costs and greater efficiency precisely because of their scale — and those efficiencies can be passed on to consumers in lower prices. The challenge for regulators is distinguishing between concentration that reflects genuine efficiency and concentration that reflects market power used to extract higher prices and profits at consumers' expense.
New Zealand's economy is small enough that this tension is particularly acute. Many markets simply cannot support a large number of viable competitors — the population base is too small. Regulators have to make difficult judgments about when to intervene and when the costs of intervention — including the risk of deterring investment and innovation — outweigh the benefits of increased competition.
Quick Q&A
What is the Commerce Commission and what does it do? The Commerce Commission is an independent government agency that enforces New Zealand's competition and consumer law. It investigates anti-competitive conduct, reviews mergers that might harm competition, and conducts market studies into sectors where competition may not be working well. It also regulates certain infrastructure sectors and enforces consumer protection law.
Why are New Zealand groceries so expensive? The grocery sector is dominated by two major players — Woolworths and Foodstuffs — which together hold around 82 percent of the market. The Commerce Commission found that this concentration, combined with barriers to entry that make it difficult for new competitors to establish at scale, has allowed the major chains to maintain margins and profitability above what a more competitive market would allow. Regulatory reforms are underway to address this.
What is open banking and why does it matter? Open banking is a system that allows consumers to securely share their financial data with third-party providers — such as fintech apps — enabling those providers to offer competing services like better savings rates, cheaper loans, or smarter financial management tools. The Commerce Commission identified open banking as a potential gamechanger for banking competition in New Zealand, and the legal framework for it was established through the Customer and Product Data Act 2025.
What is predatory pricing? Predatory pricing is when a dominant business prices its products below cost for a sustained period to drive smaller competitors out of the market, intending to raise prices once those competitors are gone. It is a form of anti-competitive behavior that is difficult to prosecute under current New Zealand law — reforms expected in 2026 aim to give the Commerce Commission a clearer legal test to identify and act on it.
Can competition law fix all these problems? Not on its own. Competition law can prohibit anti-competitive behavior and review harmful mergers, but it cannot easily create competition where the underlying market structure makes it difficult — such as in sectors where the scale needed to compete effectively is very large relative to New Zealand's market size. Market studies and regulatory intervention can help, but some sectors will remain concentrated and require ongoing regulatory oversight rather than a one-time competition fix.
Key Takeaway
Competition is not a background condition of New Zealand's economy — it is something that has to be actively maintained, monitored, and enforced. In sectors where it works well, consumers benefit from reasonable prices, genuine choice, and continuing innovation. In sectors where it has broken down — most obviously grocery retail and banking — New Zealanders have paid more than they should have for years. The reform agenda underway across both sectors, and the broader review of New Zealand's competition law, represents a serious attempt to address structural weaknesses that have been allowed to persist for too long. Whether those reforms succeed in producing genuinely more competitive markets — with real benefits for consumers — is one of the most important economic tests of the current era.
Sources
Commerce Commission — Market Study into the Retail Grocery Sector, Final Report 2022
Commerce Commission — First Annual Grocery Report 2024
Commerce Commission — Market Study into Personal Banking Services, Final Report August 2024
Commerce Commission — ComCom Moves to Disrupt Power Structures in Groceries, 2025
Commerce Commission — ComCom Digs into Supermarket Delisting, January 2026
Ministry of Business, Innovation and Employment — Supermarket Competition; Competition Study into Personal Banking Services
Beehive — Report Backs Better Banking Competition, August 2025
Finance and Expenditure Committee — Inquiry into Banking Competition, Final Report August 2025
Treasury — Finance and Expenditure Committee Inquiry into Banking Competition
Wikipedia — Supermarkets in New Zealand
New Zealand Food and Grocery Council — First Annual Grocery Report Released, 2024