Mark Dwyer / Stuff
One of the practices likely to come under close scrutiny in a Trade Commission study is the use of “discounts” by building material suppliers to reward loyal customers.
2degrees founder Tex Edwards has added the building materials industry to the list of industries he is pushing to reform.
Trade and Consumer Affairs Minister David Clark confirmed on Sunday that the industry will be the subject of the Commerce Commission’s third market study, after gasoline, and the supermarket study it is it plans to close in March.
The building materials study follows long-standing concerns that high prices for commonly used products could drive up the cost of new homes, repairs and renovations.
Edwards, who is currently involved with a group called Northelia that hopes to create a third national supermarket chain, said he currently has no business interest in the outcome of the building materials review.
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But he said MonopolyWatch NZ, a lobby group he heads, has conducted his own research on best practices in social housing construction over the past three years.
MonopolyWatch and his associates visited 32 international home-building factories, comparing costs and evaluating their processes, he said.
They intended to share their findings on better and lower-cost residential buildings with the Trade Commission, he said.
Edwards said a good rule of thumb is that materials are a quarter of the cost of building a new home, with the rest being labor.
But he believed that anti-competitive practices in the building materials industry would drive up the cost of both.
Part of the reason is that increased competition would lead to competition among manufacturers to make their products easier to install, which would lower labor costs, he said.
Clark said in a Cabinet document seeking market research approval that two companies control about 85% of the concrete supply and three companies control about 85% of the glass wool insulation supply.
He also noted that one company, Winstone Wallboards, a subsidiary of Fletcher Building, supplied about 94 percent of the country’s drywall.
The price of building materials was not transparent, he said, referring to a 2013 study by the Ministry of Enterprise, Innovation and Employment (MBIE) that highlighted the use of “discounts” within the industry.
This study indicated that dominant suppliers were suspected of using discounts to reward traders who succeeded in securing their market share.
The commission allowed Winstone Wallboards to abuse its dominant position by manufacturing and supplying drywall after an investigation in 2014.
Edwards said the commission should go beyond drywall in its market research and may need to analyze 500 products commonly used to build homes and identify the 50 or 60 key products where the competition is greatest. more worrying.
“It’s ‘death by 1000 cuts.’ There is no smoking gun or silver bullet to solve this problem, ”he said.
MonopolyWatch said in a statement it would present evidence of the impact of the industry’s “discount culture” and question why legislative guarantees for discounts were “so weak compared to those in other countries in the world. the OECD “.
“We will also present evidence showing how the current structure of the industry… misaligns the interests of consumers and those of the home assembly industry,” he said.