Commerce Commission study announced for building supplies market

On 22 November 2021 the Minister of Commerce and Consumer Affairs announced a market study to assess factors that may impact competition in the New Zealand market for the supply and acquisition of building supplies used for residential buildings.  These include flooring, insulation, roof, and structural and non-structural walls (both interior and exterior).  The study recognises that residential buildings play an important role in New Zealand’s construction industry as well as ensuring that the ever-growing housing supply can meet the demand. 

The full announcement can be accessed here.

Scope of market study into residential building supplies

As part of the announcement, the Minister has released Terms of Reference which describe the various factors that the Commerce Commission (Commission) must consider in carrying out the study.  These include, but are not limited to:

• The structure of the residential building supply industry for key supplies covered by the study;

• The nature of competition for these key building supplies (including industry pricing practices or acquisition requirements that are likely to impact competition); and

• Impediments to the entry or expansion of new innovative building supplies, including “green” building supplies or novel prefabricated products.

In directing the Commission to carry out the study, the Minister has identified a number of factors the Government considers may be impacting competition, including:

• A highly concentrated market for some building supplies;

• A high level of vertical integration in the supply chain;

• A lack of transparency in the pricing of building supplies, including the use of rebates and loyalty schemes; and

• Difficulties faced by new building supplies entering the New Zealand market.

Next steps

The Commission will be required to engage with and send general information requests to a range of stakeholders in the building and construction industry as part of the study.  The indicative timeframe for the study is as follows:

The findings of the study will help to inform any changes the Government wishes to make to enhance performance and public/consumer confidence in the residential building supply industry.  Although the Commission’s findings are non-binding, the market study was foreshadowed in Labour’s 2020 Election Manifesto, and the Government will be required to consider and respond to any recommendations made by the Commission within a reasonable time frame after the final report has been made available to the public.

This will be the third market study undertaken by the Commission, with the first market study taking place in December 2019 which looked into retail fuels, and the second market study (which is currently ongoing) looking into the retail grocery sector. 

We will provide a further update once the Preliminary Issues Paper has been released.  If you would like to discuss the Commission’s market study please get in touch with our Business Advice Team or Construction Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.