Countdown claims fail truth test

COMMENT

Good politics is seldom sound economics. And so it was with Shane Jones’ attack on supermarket chain Countdown. 

He was long on rhetoric, short on facts and calculated to inflict maximum damage. 

He told us repeatedly Countdown was an Australian corporate with a corrupt, feral culture. He told us Countdown’s suppliers, who are good, God-fearing Kiwis (I am not making this up), “live in fear, in a climate of threat, intimidation and menace.” Moreover, Countdown is guilty of monopolistic menace, blackmail, extortion and racketeering, “verging on corruption.”  

Mr Jones is a senior MP. The allegations are serious. Who would have thought the food and grocery sector was home to organised crime?

But Mr Jones provides only the briefest snippet in evidence. Countdown allegedly didn’t make sufficient profit last year. The Aussie shareholders were unhappy. Suppliers were told to write backdated cheques to cover Countdown’s shortfall or lose Countdown’s business.

Backdated cheques? To cover a shortfall? How does that work? 

Mr Jones never explains how the backdated cheques pump up Countdown profits from a year ago. 

No evidence, no explanation but that didn’t stop the New Zealand Herald’s John Armstrong declaring the attack a “virtuoso solo performance” that was “carefully conceived, astutely timed and precisely targeted.”

But was it true? And was it economically literate? Or doesn’t that matter? Perhaps for politics it’s enough that it sounds right and is sufficiently jingoistic and bombastic.

For Mr Jones, it was an easy rhetorical leap from backdated payments to fascism, blackmail, extortion and racketeering. It sounded good. It moved the crowd. Jones was on a roll.

But now it’s a week on. The excitement has worn off. And now it seems quite the leap. All we have, stripped of the rhetoric, is a claim that an unnamed manager asked for a backdated cheque from an unnamed supplier for a purpose that doesn’t add up. That’s it. 

And the economics? Countdown owns its shelf space. It’s valuable real estate. That’s because Countdown ensures its shelves are always well-stocked with quality produce at good prices. That’s why we shop there.

Suppliers want their produce on the Countdown shelves, in the best possible spot. Supermarkets are quite within their rights to charge for the use of their shelves.

And, of course, supermarkets drive a hard bargain. That’s precisely what we shoppers want them to do. They act as our agents, gathering up produce into one convenient location at prices we can afford. I don’t see too many shoppers busting to pay more for their tomatoes. Supermarkets are tough on suppliers because we shoppers are tough in hunting out bargains.

The supermarkets are big because they are good at their business. That doesn’t make them monopolies. There’s no requirement for any supplier to supply them. They can sell at their gate, the local farmers’ market or open their own store. There is nothing stopping them. 

The free market has been wonderful keeping us fed and the shelves well-stocked. The poorest among us can push a cart down the aisles buying an array of produce unavailable to kings and queens just a few generations ago.

And what’s Jonesy’s alternative? To have the government regulating prices paid to suppliers? Really? That’s the trouble with the political rhetoric. It sounds good. And it can move the people. But built on bad economics – as it inevitably always is – it quickly takes us to a place where none of us actually wants to go.