The commission acknowledged “competition for the supply and acquisition of key building supplies is not working as well as it could if it was easier for building products to be introduced and for competing supplies to expand their businesses”.
It noted a key issue is the regulatory system “continues to incentivise designers, builders and building consent authorities (BCAs) to favour familiar building products over new or competing products”.
It also said rebates that suppliers offer merchants can make it difficult for new or competing products to access distribution channels and increase sales.
But the commission stopped short of suggesting the Government bans rebate arrangements, saying rebates don’t always lessen competition.
They’re also used across a range of sectors, so banning them in relation to building supplies would call into question whether they should be banned more broadly.
The commission suggested suppliers review rebate structures to ensure compliance with the Commerce Act. In April 2023, a provision in the Act, which prohibits firms from engaging in anti-competitive conduct, will be strengthened.
The watchdog said: “Based on information collected in this study, we have opened an investigation and are continuing to consider Winstone Wallboards’ rebates.”
Fletcher Building’s Winstone Wallboards, at the same time the commission released its report, announced it would axe plasterboard rebates for customers buying its products.
As for the land covenant issue, the commission said it would undertake a programme in early 2023 to “promote broader compliance” with the Commerce Act.
It went a step further, saying: “We recommend an economy-wide review of the use of land covenants and exclusive leases (including other contractual provisions with similar effect), to assess whether a wider multi-sector solution is needed to address their impacts on competition more generally.”
Commerce and Consumer Affairs Minister David Clark said he would look into this, noting the Government has recently moved to prevent supermarkets from using covenants to stymie competition.
Another key recommendation the Commission made was for competition to be included as an express objective of the building regulatory system, which is currently focussed on safety, health, and durability.
Separately, it suggested a national information-sharing system be set up for collecting and storing product and consenting information, accessible to designers, builders, BCAs and consumers.
Offsite manufacturing was another area the Commission focussed on. It recommended the Government develop and implement a strategy to coordinate and boost the use of offsite manufacturing across all its departments and agencies.
Addressing the impact of big vertically integrated firms, like PlaceMakers and Carters, the Commission said this structure “potentially creates opportunities for certain conduct that can reduce competition”.
“However, it does not appear that this industry structure normally has a material adverse effect on competition for key building supplies at either the supplier level or the merchant level.”
Building and Construction Minister Megan Woods noted the Commission’s report complements a Ministry of Business, Innovation and Employment (MBIE) review of the consent system.
She said updated guidance on the building consent process and a new standardised checklist for residential building consent applications, released today would help lift the quality and consistency of building consent applications.
National’s building and construction spokesman Andrew Bayly supported the commission’s recommendations.
Here is a summary of the Commission’s recommendations:
Enhancing the regulatory system:
1. Introduce competition as an objective to be promoted in the building regulatory system
2. Better serve Māori through the building regulatory system
3. Create more clear compliance pathways for a broader range of key building supplies
4. Explore ways to remove impediments to product substitution and variations
Supporting sound decision-making:
5. Establish a national system to share information about building products and consenting
6. Establish an education and mentoring function for a better co-ordinated and enhanced approach by BCAs to consenting and product approval processes
7. Develop and implement an all-of-government strategy to coordinate and boost OSM (offsite manufacturing)
Addressing strategic business conduct:
8. Promote compliance with the Commerce Act, including by discouraging the use of quantity-forcing supplier-to-merchant rebates that may harm competition
9. Consider the economy-wide use of land covenants, exclusive leases and contractual provisions with similar effect.
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