Fletcher axes rebate scheme at same time Commerce Commission announces investigation

The Commerce Commission delivered its final report into the building supplies industry on Tuesday, while launching an investigation into Fletcher Building's GIB rebate scheme.

Fletchers, through its subsidiary Winstone Wallboards, makes GIB, and had 94 percent of the plasterboard market in New Zealand. It was also giving rebates to companies who bought GIB in bulk and showed loyalty, shutting smaller players out of the market.

But as the Commission announced its inquiry, Fletchers decided to act before they were forced to and said they were axing their reward scheme.

For the Kiwis looking for a better building deal, the Commerce Commission said this report has their back.

"Competition can and should take a more prominent position," said chair Dr John Small. 

It's released its findings into our residential building supplies sector and identified a cycle within the industry.

Homeowners want their projects completed on time, building consent authorities prefer familiar products as they reduce risks, designers then specify those familiar products as they're likely to be granted consent, merchants then stock those familiar products and then builders buy them to avoid delays.

All of this takes competition out of the market, the commission found. 

"It makes life difficult for anybody trying to challenge the familiar products," said Dr Small. 

The commission's got nine recommendations to break that cycle, including clearer compliance pathways so new products can enter the market more easily, introducing competition as an objective in the building regulatory system and actively discouraging rebate schemes used by some to lock in loyalty.

Newshub spoke to Jeremy Wang, from building supplies merchant Baier Group, earlier this year. He reckons rebates from bigger players got his alternative plasterboard kicked off some shelves. 

"We had our board in some of the bigger chain stores then all of a sudden they said 'no, we can't stock your board', and I believe that's because of the rebate system," said Wang in August.

One of those bigger players is Fletchers. The building behemoth appears to have used rebates for its Winstone Wallboards so significantly - and potentially anti-competitively - that the commission's launched a separate investigation into them.

But at the same time as the Commerce Commission was holding a press conference on Tuesday morning, Fletchers announced via a statement that it's giving rebates the boot.

"That's uh, that's uh, fresh news today," said Dr Small when he was told during the press conference. "That sounds like good news."

The minister in charge is chuffed with Fletchers' response.

"What we're seeing here is the effect of market studies. When there's a spotlight on the sector, the sector thinks carefully about its behaviour," said David Clark. 

The Commerce Commission has investigated Fletchers' use of rebates once before back in 2014 and found there was no wrongdoing back then. 

It's yet to decide whether to drop this fresh investigation into the mega building company - despite Fletchers dropping the very thing it's getting probed for.