Winstone Wallboards makes various types of Gib including Aqualine.
Winstone Wallboards makes various types of Gib including Aqualine.
The Commerce Commission is taking action against Fletcher Building’s Winstone Wallboards over customer rebates on its Gib-branded plasterboard.
Winstone has about 94% of New Zealand’s wallboard market and Fletcher today acknowledged the actions but said it would “vigorously defend” itself.
The commission says Winstone’s use of retroactive tiered rebates in its plasterboard supply agreements with building supplies merchants between 2017 and 2022 breached the Commerce Act.
John Small, commission chairman, says that while the actions are historical, the commission considers the conduct to be serious and warrants proceedings under the Commerce Act.
“While the use of rebates can deliver benefits, retroactive tiered rebates can also harm competition when they’re used by a supplier with substantial market power because they can reduce the ability of smaller suppliers or new entrants to compete.
“In this case, we allege Winstone used retroactive rebates to damage competition, ultimately leading to consumers paying higher prices.”
Winstone Wallboards owner Fletcher Building said it had previously advised of the commission’s intention to file legal proceedings in its announcement of August 23.
“For the reasons set out in its prior announcement, Winstone Wallboards intends to vigorously defend the Commerce Commission’s proceedings, and notes that they could take some time to resolve,” Fletcher’s statement to the NZX today said.
Because the proceedings are before the court, the commission said it could not comment further.
The use of retroactive rebates was identified as a potential barrier to competition in the commission’s market study into residential building supplies, completed in December 2022.
Entering into or giving effect to agreements with the purpose, effect or likely effect of substantially lessening competition is illegal under section 27 of the Commerce Act, the commission said.
GIB plasterboard is made by Winstone Wallboards.
These agreements could be in the form of a written contract or an informal understanding.
Section 36 of the Commerce Act prohibits firms with substantial market power from misusing that market power.
At the time relevant to these proceedings (2017-2022), section 36 prohibited firms taking advantage of their substantial market power for certain prohibited purposes.
Section 36 has since been amended to prohibit firms with substantial market power from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition.
For years, it has been giving rebates to customers who buy wallboard in volume.
But under threats the commission would probe this area, that practice had stopped, even though the company indicated there was nothing wrong with what it was doing and a 2014 investigation found nothing to see.
“Winstone Wallboards has already informed its merchant customers that it will discontinue use of that type of rebate and will move to a tailored, flat pricing model based on volume,” the company announced in 2022.
Winstone is New Zealand’s only plasterboard manufacturer and has a new $400 million plant in Tauranga which opened last year.
In 2022, Winstone said rebates were essentially a volume incentive, where a customer receives a better price, measured over all their purchases if they buy pre-agreed volumes of a product over a period of time.
Such rebates were very common, not just across the building supplies industry but other parts of the economy as well, the company said two years ago.
“As we said in our submission, rebates are simply one aspect of competing. Winstone Wallboards was the subject of some focus in the market study, including the nature and impact of its rebates,” the company added.
“Merchants told the commission that their commercial decisions are not materially influenced by rebates. We also note that the commission has previously investigated Winstone Wallboards on this topic, concluding that there was no issue,” the company said.
That was a reference back to a 2014 study which found the wallboard was popular because it was good quality and Winstone did a good job communicating with customers.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
