In this opinion piece, Andy Loader examines Labour’s proposal to outlaw price gouging in essential goods and services. He questions how unfair pricing would be defined and argues that regulating prices could discourage supply without addressing the underlying causes of high living costs. Comparing the parties’ supermarket policies, Loader contends that taxation, regulation and broader economic policy deserve greater scrutiny.
Labour have promised as part of their pre-election manifesto, that they will make price gouging illegal, so big companies can't use their market power to overcharge you for the essential costs of living.
They state that New Zealanders are working hard and deserve to have fair prices for those essentials. Things such as:
- Food and groceries
- Energy
- Fuel
- Telecommunications
- Banking
- Insurance
They make the statement that; “when only a handful of big companies control the price of things people need, like groceries, power and fuel, they also have the power to charge unfair prices, simply because customers have nowhere else to go”.
Right now, there's no law against excessive price gouging. Labour will change that, so that the big companies can't rip you off, and you and your family can save more money.
What is price gouging?
Price gouging is when a company uses its market power to charge excessive prices for goods or services that customers cannot do without. Right now there is no law against excessive price gouging in New Zealand.
What they claim they'll do to make Price Gouging Illegal
Labour will crack down on big companies who charge excessive prices for essential goods and services. They claim they will change the law so companies can't exploit any market power to overcharge people for the essentials.
They'll take action to prevent powerful companies from unfairly squeezing the growers, producers, and other supplier’s people rely on.
How it works
Labour has stated that they will make price gouging illegal and set clear legal tests.
They will change the law to define when high prices become unfair and excessive. When prices are well above what it costs a company to supply, or well above what the same goods cost in a competitive market, large companies could face penalties and repay the consumers they have overcharged.
They will give the Commerce Commission power to investigate claims of price gouging and to take court action against companies accused of using their market dominance to charge unfair and excessive prices.
Consumers or groups acting for consumers, growers, or suppliers will be able to take complaints to the Commerce Commission.
When will the new law apply?
The law will cover essential goods and services: food and groceries, energy, fuel, telecommunications, banking, and insurance.
They claim the new law will apply where a company has enough market power that customers can't realistically switch, suppliers have nowhere else to go, or new competitors struggle to enter the market.
The policy won't apply to the local dairy, cafe or tradesman and they claim that investment, innovation, and improvements that help with supply will also be protected.
What will be considered an unfair or excessive price?
High prices will be declared unfair and excessive, where prices are well above what it costs a company to supply, or well above what the same goods cost in a competitive market.
They claim that the law will only apply to the big players. Those companies which have enough control over the market such that customers cannot realistically switch, suppliers have nowhere else to go, or new competitors struggle to enter the market.
Labour wants to outlaw "price gouging" but they have no real idea what that is.
What will happen when companies break the new law?
Companies that use their market power to charge unfair and excessive prices may face court action and penalties; and be ordered to give back what they overcharged.
This new law will also apply when powerful companies unfairly squeeze the growers, producers and other supplier’s people rely on, and supplier groups will be able to bring complaints to the Commerce Commission.
The reality of this promise
Labour promised to outlaw "price gouging" and in reply National has promised to carve up the supermarket monopolies. Both say their policies will finally sort the supermarkets and prevent price gouging.
Labour wants to outlaw "price gouging" but they have no real idea what that is.
“Nearly one in three New Zealand households couldn’t afford enough food last year. The price of butter has gone up 58%, bread is up 45%, and mince is up 30% in the last three years,” the Labour party’s commerce and consumer affairs spokeswoman, Arena Williams, said.
She said growers and suppliers were also doing it tough, and that the party intends to target the few “big players”.
“It won’t touch the 97% of New Zealand businesses that are small, like your local dairy or cafe.
“It also only applies in markets for essentials, like food, power, fuel, transport, telecommunications, banking, and insurance.’
What is price gouging, in effect nobody knows.
Prices are a signal that matches what is scarce with what is wanted. Get the signal wrong and the supermarket shelves empty.
High prices hurt but they are created by demand and are also how you get more supply. Cap them and you get less of whatever you claimed to care about.
Governments that take over pricing do not abolish scarcity. They hide it. Then they invent queues, coupons, black markets, and speeches about fairness.
Famines are not caused by shopkeepers. They arrive when politics replace prices.
People are not poor because of supermarket checkouts, they are poor because bad policies have been destroying the economy for years -- tax, spend, regulate, then wonder why the essentials cost more.
Labour is now in effect claiming they have identified a new crime of price gouging which in actual reality is nothing more than charging what the market will bear and their answer to that is more regulation.
Labour wants to police "excess profit," National wants to split up the supermarket duopoly and the Greens want to nationalise the shops.
Green Party announced earlier this month its own policy to nationalise 120 pre-existing supermarkets to create a new Government-owned supermarket, “KiwiMart”.
National’s finance spokeswoman Nicola Willis said the Green Party’s policy was reminiscent of communism.
Same instinct. Blame the till. Spare the Beehive.
They should all know better as they have seen price controls abroad turn into shortages but in fact they are all desperate at this time in our election year and searching for a villain to blame for all of the policy ills.
Business is a handy target which hides the real villain: “Politics & Policies.”
If you want cheaper essentials, stop strangling the productive economy. Cut the taxes and the rules that make everything dear.
Outlawing the signal that keeps the supermarket stocked may gain you a few votes but it also severely impacts those at the bottom of the socio-economic charts.