New Zealand's competition regulator has released its first-ever assessment of the state of competition across the economy, finding that while markets have become slightly less dominated by the largest firms, it is getting harder for new and smaller businesses to break through.
The Commerce Commission's baseline research report, released this month, analyses 22 years of firm-level business data from 2001 to 2023 and finds economy-wide competition trends are mixed, with some measures pointing in opposite directions.
Market concentration – or the share of industry output held by the largest businesses – has declined steadily over the period, which normally indicates improving competition according to the Commission. But business dynamism, which measures the rate of new firms entering industries and challenging incumbents, has fallen materially over the same period.
Entry and exit rates have both dropped, new entrants are capturing smaller shares of their industries, and large incumbent businesses are increasingly able to hold their positions over time. The Commission found little difference between the market share new entrants hold one year after entering an industry and five years later, suggesting businesses that do break in are largely failing to grow.
"Bigger, older businesses are becoming more entrenched," the report stated. "This suggests market conditions are favouring larger incumbent businesses and it is harder for smaller, newer businesses to displace them."
Retail trade sits in the middle of the Commission's competition rankings across 16 industry divisions, neither among the most nor least competitive sectors in the economy. While overall competition is improving in the sector, the report noted that competition in business dynamism and price-cost margin worsened between 2001 and 2023.
Post-GFC, between 2010 and 2023, business dynamism in retail appeared to improve, while price-cost margin still remained worsening. It must be noted that this includes all retail, including food, fuel and other store-based retailing.
Some of the larger players in retail, particularly in the apparel space, continue to hold market share. Briscoe Group – owner of Briscoe Homewares and Rebel Sport NZ – has managed to hold its sales growth post-COVID, with group sales having nudged up ever-so-slightly by around 1 per cent each year.
Wesfarmers, which operates Kmart Group across Australia and New Zealand, also reported a group-wide sales lift in the first half of FY26 in New Zealand alone, by about $10 million to $1.469 billion.
The industries found to have the greatest competition over the period were other services, construction, accommodation and food services, and administrative and support services. Those with the least competition were electricity, gas, water and waste services, financial and insurance services, information media and telecommunications, and mining.
Commerce Commission chair Dr John Small said these upstream industries are critical for the New Zealand economy.
“Weak competition in these markets can mean higher costs and lower-quality services cascade through to businesses and households, increasing the prices people pay for everyday goods and services,” Dr Small said. “That’s why work already underway to promote stronger regulatory settings and more effective competition is so important.”
While the report shows real strengths in parts, Dr Small said it also highlights the value of promoting competitive opportunities for a wider range of businesses, particularly for smaller and newer firms that appear to be facing greater barriers to growth.
“Competitive markets are critical to New Zealand’s economic performance. When competition weakens, innovation slows, costs rise, and consumers pay the price. A competitive environment enabling small businesses to grow is essential for productivity and long‑term growth.”
Although grounded in domestic data, the findings align with international trends. The OECD has seen evidence of weakening competition across many advanced economies since 2000. The findings also sit alongside persistent domestic challenges, such as low productivity growth and how infrastructure investment is planned and delivered.
“Competition agencies around the world are increasingly balancing law enforcement with more active tools, including access, inter-operability and non-discrimination requirements,” Dr Small said. “This reflects a broader shift in how competition policy is applied in practice, including in response to the challenges of digital innovation and more complex markets.”
In light of these challenges, Dr Small said the report is an important step in building the evidence base needed to promote fair, dynamic, and competitive markets.
“This gives us the clearest view yet of how competition is working across the economy and provides a positive foundation to build on,” he said.
“As a diagnostic tool, it highlights where system‑level settings may need attention, and where competition settings may need to evolve as markets change, alongside the Commission’s ongoing regulatory and enforcement work.”
On market performance, price-cost margins have been roughly stable over two decades but have risen slightly since the global financial crisis, suggesting weaker competitive pressure in more recent years.
The report draws on data from Stats NZ's longitudinal business database, which is compiled largely from tax returns, and covers privately owned for-profit businesses. It does not capture competition from overseas firms without a New Zealand tax presence, some very small businesses, or non-price dimensions of competition such as quality and innovation.
The Commission noted that the report is intended as a baseline for future monitoring and will be updated as new data becomes available.