Commerce watchdog focusing on industry rip-offs


The Commerce Commission is so concerned about construction industry cartels, price-fixing and bid-rigging that it has launched a web site calling for whistleblowers.

Kate Morrison, the commission’s competition general manager, says the site — — went live partly as a result of Canterbury’s rebuild but also due to Auckland’s busy building sector.

“It is widely acknowledged internationally that corruption, fraud and anti-competitive practices, for example price-fixing, bid-rigging and market sharing, occur after natural disasters,” Ms Morrison says.

And it isn’t just Canterbury — rorts could be widespread in other parts of the country.

“The idea for a web site arose from our work with the sector in the last few years. We saw a need for a user-friendly guide specifically tailored to the needs of construction businesses and workers to help them understand and comply with the laws we enforce.”

The sector is incredibly important to the economy for a number of reasons, and estimates suggested the country was on the brink of its largest construction boom for 40 years, partly because of Canterbury but also the high levels of activity in Auckland, she says.

Overseas experience indicated the sector was very susceptible to cartel or illegal agreements between firms not to compete, such as the restriction of outputs and allocation of customers, suppliers or territories.

The new web site cites this year’s $1.85 million fine in the High Court of Carter Holt Harvey after it entered into an understanding with Fletcher Distribution to fix prices for supply of structural timber to Auckland commercial customers.

The commission became aware of the understanding in January 2013 through its cartel leniency programme when Fletcher Distribution, operating as PlaceMakers, sought leniency.
Meanwhile, the commission is investigating the plasterboard market after a complaint from Elephant Plasterboard managing director Kevin van Hest.

He claimed arrangements between Fletcher Building’s Winstone Wallboards and major building supply merchants restrict the non-Gib board sales, leaving him with 3% of the market after starting out in the 1980s.

Fletcher said it was co-operating fully with the commission on the plasterboard investigation, which began in September.

Investor relations and capital markets group general manager Philip King acknowledged the company was operating a system to reward major building supply merchants for Gib board sales.

“Rebate structures are prevalent in most industries, not just building materials, and in reality amount to price competition with supply terms being based on volume and the duration of contractual relationships,” Mr King says.

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