The Commerce Commission has filed proceedings under sections 27 and 36 of the Commerce Act in the Auckland High Court against Winstone Wallboards, a subsidiary of Fletcher Building that manufactures and supplies GIB-branded plasterboard. The Commission alleges that Winstone’s use of retroactive tiered rebates in its plasterboard supply agreements with building supplies merchants between 2017 and 2022 breached the Commerce Act.

Commission Chair, John Small, says that while 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.”

As the proceedings are before the Court, the Commission cannot comment further at this time.

Background

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. These agreements could be in the form of a written contract or an informal understanding. More information about section 27 can be found in the Commission’s Section 27 Factsheet. 

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 (from April 2023) to prohibit firms with substantial market power from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition. More information about the amended section 36 can be found in the Commission’s Misuse of Market Power Guidelines.

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