'Monopoly buster' Tex Edwards to lobby for reform of building materials industry

Monday, 22 November 2021

One of the practices that is likely to come under scrutiny in a Commerce Commission study is the use of ‘rebates’ by building materials suppliers to reward loyal customers.

2degrees founder Tex Edwards has added the building materials industry to the list of industries he is lobbying to reform.

Commerce and Consumer Affairs Minister David Clark confirmed on Sunday that the industry would be the subject of the Commerce Commission’s third market study, after petrol, and the supermarket study that it plans to wrap up in March.

The building materials study comes in the wake of longstanding concerns that high prices for commonly used products may be pushing up the cost of new housing, repairs and renovations.

Edwards, who is currently involved a group called Northelia that hopes to create a third national supermarket chain, said he didn’t currently have any business interests in the outcome of the building materials review.

* Is it really more expensive to build new in New Zealand?

* Many factors push up cost of building new, construction industry says

* ComCom clears Winstone Wallboards

Minister for Consumer Affairs and Commerce David Clark announces the Commerce Commission’s probe into the building supplies industry, in Brooklyn in Wellington on Sunday.

But he said MonopolyWatch NZ, a lobby group that he fronts, had been carrying out its own research into best practices in building social housing over the past three years.

MonopolyWatch and its associates had visited 32 international house-building factories, comparing costs and assessing their processes, he said.

They intended to share their findings on higher-quality, lower-cost residential buildings with the Commerce Commission, he said.

Edwards said a good rule of thumb was that materials made up a quarter of the cost of building a new house, with the rest being labour.

MonopolyWatch spokesman Tex Edwards says it will be giving evidence to the commission after looking at best practices in the social housing construction industry.

But he believed that anticompetitive practices in the building supplies industry would be pushing up the cost of both.

That was in part because more competition would result in manufacturers competing to make their products easier to install, which would reduce labour costs, he said.

Clark said in a Cabinet paper seeking approval for the market study that two companies controlled about 85 per cent of the supply of concrete, and three companies controlled about 85 per cent of the supply of glass wool insulation.

He also noted that one company, which is Fletcher Building subsidiary Winstone Wallboards, supplied about 94 per cent of the country’s plasterboard.

The price of building supplies was not transparent, he said, referencing a 2013 study by the Ministry of Business, Innovation and Employment (MBIE) that highlighted the use of “rebates” within the industry.

That study indicated that dominant suppliers were suspected of using rebates to reward merchants that succeeded in entrenching their market shares.

The commission cleared Winstone Wallboards of abusing its dominant position manufacturing and supplying plasterboards after an investigation in 2014.

Edwards said the commission would need to look beyond plasterboard in its market study and might need to analyse 500 products commonly used to build houses and go on to identity the 50 or 60 key ones where competition was of most concern.

“It is ‘death by 1000 cuts’. There is no smoking gun, or silver bullet to fix this problem,” he said.

MonopolyWatch said in a statement that it would present evidence on the impact of the industry’s ‘rebate culture’ and would question why legislative safeguards around rebates were “so weak compared with those of other OECD countries”.

“We will also present evidence showing how the current industry structure … misaligns the interests of consumers and those of the house assembly industry,” it said.