Competition is the lifeblood of markets – the force that drives companies to offer better products at lower prices, raising living standards and quality of life. Without it, firms face weak or no incentives to improve what they offer us as consumers.

While many markets in New Zealand have plentiful competition, some unfortunately do not. There are near-monopolies, for instance, in the importing of certain building products. Public concern is also growing about the supermarket duopoly – that is, the dominance of the two large supermarket chains, which the Commerce Commission has estimated generate $1m a day in excess profits above what they would earn in a competitive market. Countries of similar size, like Denmark, have multiple supermarket chains.

There are also concerns about markets dominated by a small number of firms, a situation known as an oligopoly: this includes power generation and banking. In all the above cases, there is a strong likelihood that the absence of effective competition means prices are far higher (and quality standards far lower) than they should be, and that this affects poorer consumers the most. Suppliers to these uncompetitive industries may also be suffering.

IDEA’s research will look at what can be done to drive more competition in these sectors – and what, more generally, needs to change in our competition laws and the intellectual framework that underpins them.