CC recommends competition for the NZ building industry

Ōtepoti -The Commerce Commission’s draft report into competition in the residential building supplies industry has identified two main factors negatively impacting competition.

It recommends changes that could deliver more choice and better quality along with greater innovation for the benefit of New Zealand homeowners.

A market study shows tried and tested products have become embedded in home-building practice in New Zealand and a building regulatory system should include competition as a deliberate objective.

In some circumstances, some types of rebates paid by established suppliers to merchants appear to be reinforcing difficulties faced by competing products.

The commission’s preliminary view is that competition for the supply of key building supplies is not working as well as it could and would be improved if it was easier for building products to be introduced and for competing suppliers to expand their business.

The building sector is governed by a building regulatory system, which has at its heart, the provision of safe, healthy, and durable homes for New Zealanders.

While innovation is recognised as important to achieving these objectives, the commission’s preliminary view is that the regulatory system has a number of features that prevent competition from working well.

The commission’s draft report says the building code and associated systems are complex to navigate and competition is not an express objective of the Building Act.

It is widely accepted that rebates are not all bad either. They can deliver benefits, such as providing a way for suppliers to pass through lower costs per unit from supplying greater volumes.

However, when quantity-forcing rebates are used by a supplier with a large share of a market, they can harm competition by reducing the ability of smaller competitors or new entrants to compete.

The draft report identifies that plasterboard is commonly specified by brand in building plans, and this has made it difficult for builders to substitute competing products to Winstone Wallboards’ GIB-branded plasterboard.