Building materials report not ‘all clear’ to Fletchers, watchdog says

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  • The Commerce Commission says it must be easier to introduce new construction products to the market.
  • But he doesn’t recommend breaking up existing suppliers.
  • She is concerned about the use of “kickbacks” by dominant companies and will prepare more information on the practices she wishes to end.
  • Prices listed on building materials invoices should be the price paid, he says.
  • Hei tā te Kōmihana Tauhokohoko, me ngāwari ake te mau mai i ngā rawa waihanga ki te mākete.
  • Engari kāore e marohitia nei te motunga i ngā kaiwhakarato o nāianei.
  • Kua āwangawanga i te whakamahinga o ngā “whakahokinga pūtea” a ngā pakihi matua, ā, ka whakarite mōhiohio anō mō ​​ngā mahi e hiahiatia nei kia aukati.
  • I tōna tikanga, ko ngā utunga ki ngā nama rawa waihanga te utu ka utua, hei tā rātou.

The country’s competition watchdog does not recommend breaking up companies in the building materials sector, although it found in a draft report that competition in the sector was not working as well as it should. could.

Instead, the Commerce Commission recommended focusing on industry and regulatory reforms that it hopes could bring down the price of new homes by helping new suppliers of building materials enter the market. market.

Trade Minister David Clark said the commission had done precisely what it was asked to do.

“I expected the commission to look at how the regulatory and standardization systems work in practice, and they came back with conclusions.”

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Commission Chair Anna Rawlings said her draft market study released on Thursday did not amount to a “clear picture” for companies such as Fletcher Building, whose subsidiary Winstone Wallboards dominates board supply. of plaster.

“We have discussed the vertical integration of a few vendors and merchant chains and identify that this can sometimes give rise to difficulties, so it’s not a ‘all clear’.

“But we haven’t found at this stage that vertical integration significantly affects competition at the supply or merchant level,” she said.

ROBERT KITCHIN/STUFF

The government is responding to the Commerce Commission’s market survey of the building materials sector.

The Commerce Commission found that competition would be improved if it was easier for building products to enter the market and for competing suppliers to expand their business.

Rawlings said his surveys had shown that “tried and tested” products had become mainstreamed into New Zealand home building practices, and that the building regulation system should include competition as a “deliberate goal”.

“Despite the flexibility to use new products available in the system, getting them accepted for general use is too slow, expensive and uncertain,” she said.

“What we have identified is a true circle of conduct that reinforces the regulatory system and its barriers for new and competing products.”

Lack of competition in the supply of building materials has been blamed for driving up the cost of new homes.

SUNGMI KIM / Stuff

Lack of competition in the supply of building materials has been blamed for driving up the cost of new homes.

Gib-brand plasterboard was one of the products commonly specified in building plans, and that had made it difficult for builders to replace it with competing products, she said.

The commission found that some rebates paid by building materials companies to merchants aggravated competition concerns.

The most concerning discounts rewarded merchants for buying larger volumes from a single supplier and could deter them from stocking competing products in their stores, she said.

The commission did not recommend new laws to restrict the use of rebates, but Rawlings said in some cases they could violate trade law and were more likely to do so once a already legislated modification of this law would enter into force next year.

This change will mean that firms with significant market power may be prevented from engaging in conduct that could have the effect of substantially lessening competition, whether or not that was their intention.

Rawlings said the commission will provide more information to the industry about the types of discounts it finds unacceptable before the law change takes effect.

Commerce Commission Chair Anna Rawlings said the commission decided against making structural changes to tackle “vertical integration” in the building materials market.

MONIQUE FORD/Stuff

Commerce Commission Chair Anna Rawlings said the commission decided against making structural changes to tackle “vertical integration” in the building materials market.

National MP Andrew Bayly, the party’s Construction spokesman, said the commission had done a good job of determining what the issues were in the area. However, most people were aware of these issues anyway, he said.

“I’m a bit surprised that they concluded that vertical integration doesn’t appear to be a factor affecting competition in the long term, particularly when they raise the issue of quantity-based discounts and possible land restrictions.”

Vertical integration refers to the ability of product manufacturers to also control the distribution of those products.

Bayly said there didn’t appear to be much data to support the commission’s view that vertical integration was not a problem.

It was a “missed opportunity” that the commission did not meaningfully examine whether suppliers were able to extract excess profits, he said.

But he said National was not calling for any company in the industry to be broken up, saying determining whether that was necessary was the role of the commission.

National Party MP Andrew Bayly questioned why the competition watchdog had not looked in detail at comparing suppliers' prices with those overseas.

ROBERT KITCHIN/Stuff

National Party MP Andrew Bayly questioned why the competition watchdog had not looked in detail at comparing suppliers’ prices with those overseas.

Housing Minister Megan Woods said building products could cost up to four times more than in other markets.

She said it would not be appropriate for the government to say what action it intended to take until the draft study and its recommendations were finalized in December, but it ‘flagged some really useful areas for further investigation’. .

A spokesperson for Fletcher Building called the report comprehensive and said the company would take its time to review the issues raised by the commission.

Jarden analyst Grant Swanepoel predicted the report would have little impact on Fletcher Building, whose share price was up 0.6% at $21.62 per share on the NZX as of midday. Thursday.

In addition to recommending that competition be specified as a goal in building regulations, the commission recommended developing systems to centralize the sharing of information about building materials.

Rawlings said companies that misrepresented the true cost of building materials in their invoices to customers to conceal the impact of discounts they had received could be breaking fair trade law.

“We would expect that if customers were told the price paid for a product, that should be the price,” she said.

Builders who overstated the actual price they paid for materials in their invoices should take that as a warning, she confirmed.

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