Divestiture in the New Zealand Grocery Sector? An analysis and application of the principles of divestiture in the context of the New Zealand Grocery Sector

Abstract

There is considerable concern about the state of competition in the New Zealand grocery sector. Recent Government responses have not helped to quell this concern. Many believe that only structural separation in the form of divestiture will restore competition to the grocery sector. This paper examines findings of the Commerce Commission’s market study of the grocery sector and the Governments response to those findings. It then seeks out the principles of divestiture as applied by New Zealand and United States Courts. Finally, it applies these principles to the New Zealand grocery sector. Overall, it submits that the Courts have three key elements when analysing divestiture as an anticompetitive remedy. Firstly, causation. Secondly, the effect of the divestiture. Thirdly, the applicability of alternate remedies. Applying each of these elements to the grocery sector reveals that, whilst there would be some difficulty in implementation, the grocery sector is a situation where divestiture would be favoured by a Court.