John Small, chairman of the Commerce Commission, says the watchdog has recommended nine steps to improve competition in the building materials market.
It had also opened an investigation into “volume-based discounts” offered by Winstone Wallboards, a subsidiary of Fletcher Building, it said.
The commission said it would “discourage” the use of volume-based rebates offered by major construction product suppliers, as it could make it more difficult for new suppliers to gain a foothold in the supply chain.
Small said discounts from suppliers can be beneficial, but in the case of the building materials industry, they hinder competition.
READ MORE:
* GIB and the competitive problems of drywall
* The cost of building a home is more than three times what it could be, ComCom told us
* Windows in, plumbing out – ComCom responds to building materials
* Government announces Commerce Commission inquiry into housing supplies
The investigation into Winstone Wallboards had opened a week ago, he said.
Winstone’s Gib is the dominant product in the drywall market.
Fletcher Building said in a statement it was surprised by the commission’s investigation, which it said would be the third by the watchdog on the same issue after two previous inquiries concluded “there was no problem”.
SUNGMI KIM/Stuff
Competition in the building materials market has long been a concern of the government.
Such discounts were “very common, not only in the building materials industry, but also in other parts of the economy,” the company said.
However, Fletcher said it had decided to stop using those types of discounts and would move to a “tailor-made, fixed, volume-based pricing model” given the committee’s preference.
Small said he “liked the sound very much” of the change, but could not say whether it would be enough to persuade the commission to drop its investigation.
“We’re going to have to talk to them about what exactly that means,” he said.
release the commission’s market study in the building materials industry on Tuesday, Small said it couldn’t ignore the need for change in the industry.
In line with recommendations in an August draft report, it recommended establishing a national database to share information on construction products, and making promoting competition a target in construction regulation.
ROBERT KITCHEN/STUFF
Former Commerce Committee Chair Anna Rawlings discusses her concept study on building supplies (video first published in August).
The other measures proposed by the committee are also mostly aimed at making it easier to get a wider variety of products to market and to be accepted by customers.
Small said there was a “self-reinforcing cycle” in the market that was softening competition and that the commission wanted to break.
“While there are some general recommendations, there are also some very specific ones that I think make a difference.”
Commerce Secretary David Clark welcomed the commission’s report and said it would respond to the recommendations in March.
Building and Construction Minister Megan Woods said building materials make up a significant portion of the cost of new homes and that the government was already working on reforms in the construction industry, including an overhaul of the building permit system.
“Recommendations in the report align with the steps we have taken to solve the national drywall shortage. But we know more needs to be done to ensure that consumers get a better deal and that builders have the materials they need to do their jobs,” she said.
“The recommendations of the Trade Commission are in line with the current review of the consent system by the Ministry of Construction, Innovation and Employment,” she said.
National Building and Construction Party spokesman Andrew Bayly said it supported the committee’s recommendations, including one that would make it easier for iwi to authorize homes on iwi land.
Government announced the market research in November last year, aiming to examine competition in the industry and whether New Zealanders are paying too much for supplies.
The study is satisfactory an election promise from the Labor Party made in the run-up to the 2020 elections, and follows similar surveys of gasoline prices and supermarkets.
It was launched due to concerns about a lack of competition in the construction industry and that New Zealanders were paying above expectations for building materials.
The government has long been suspicious that materials were too expensive and that too few players dominated the market Woods notes construction products can be up to four times more expensive than in other markets.
Fletcher Building shares traded 3 cents to $5 during late morning trading on the NZX, in line with a drop in the NZX top 50, which also fell 0.6%.