Commerce Commission takes GIB manufacturer Winstone Wallboards to court alleging anti-competitive conduct 

The Commerce Commission has filed court proceedings against GIB manufacturer Winstone Wallboards, alleging anti-competitive conduct in its use of retroactive tiered rebates in plasterboard supply agreements with building supplies merchants over a six-year period.

Winstone Wallboards is a subsidiary of Fletcher Building. 

"...we allege Winstone used retroactive rebates to damage competition, ultimately leading to consumers paying higher prices," Commerce Commission Chairman John Small says.

Fletcher Building says Winstone Wallboards intends to "vigorously defend" the Commerce Commission’s proceedings, filed in the Auckland High Court, adding they could "take some time to resolve."

Below is the Commerce Commission's statement.

Commission files proceedings against GIB manufacturer Winstone Wallboards for anti-competitive conduct 

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.

Here's Fletcher Building's statement.

Commerce Commission Winstone Wallboards proceedings

Fletcher Building Limited (FBU) acknowledges the Commerce Commission’s legal proceedings against Winstone Wallboards have been filed with the High Court, seeking declarations that Winstone Wallboards contravened the Commerce Act in relation to its historical use of volume rebates, together with associated civil pecuniary penalties.

FBU has previously advised of the Commission’s intention to file these legal proceedings in its announcement of 23 August 2024.

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.

And here's Fletcher Building's August 23 announcement.

Commerce Commission Winstone Wallboards Investigation

Fletcher Building Limited (FBU) advises that it has received notification from the Commerce Commission of the outcome of its investigation in relation to the historical use of volume rebates by Winstone Wallboards. The Commission has advised that it considers that Winstone Wallboards’ use of the volume rebates (which were discontinued by the company in 2022) breached the Commerce Act. The Commission intends to file legal proceedings against Winstone Wallboards, seeking declarations that Winstone Wallboards contravened the Commerce Act and civil pecuniary penalties.

We disagree with the Commission’s conclusion, given that, during the recent Building Products Market Study, merchants told the Commission that the rebate structures were not a factor that inhibited competition. As we submitted during that process, these rebates are common within the building products industry and are simply one aspect of competing. The Commission itself acknowledged that volume rebates were widespread.

In addition, the Commission comprehensively investigated Winstone Wallboards on this topic in 2014, concluding that Winstone Wallboards' market share was driven by its attractive overall product and service offering, not the rebates, and that the evidence did not support a conclusion the rebates breached the Commerce Act.

As the Commission concluded in 2014, we are confident, regardless of the presence of rebates, that our customers choose Winstone Wallboards’ products because of their quality and range, along with the service we provide.

The Commission has indicated that it anticipates filing formal proceedings by the end of October 2024. Winstone Wallboards intends to defend the proceedings vigorously, noting that legal action could take some time.