The Commerce Commission (Commission) has filed civil proceedings against Winstone Wallboards (Winstone), a manufacturer and supplier of GIB-branded plasterboard, in relation to alleged anti-competitive conduct through Winstone’s use of retroactive tiered rebates in its plasterboard supply agreements with building supplies merchants. These are the first proceedings the Commission has filed under s 36 of the Commerce Act (the Act) in over a decade.
What was the alleged conduct?
The Commission’s press release alleges that the manner in which Winstone used retroactive rebates damaged competition by reducing the ability of smaller plasterboard suppliers or new entrants to compete in the relevant market and may have led to consumers ultimately paying higher prices. While there is limited public information available regarding the proceedings, generally these types of rebates offer customers some form of discount or other financial incentive in return for purchases of certain quantities of product (in this case, GIB plasterboard).
What will the Commission need to prove to establish its claims?
The Commission has filed proceedings under both s 27 (the prohibition on anti-competitive agreements) and the previous version of s 36 of the Act (the misuse of market power prohibition) which was in effect during the relevant period (2017 – 2022). In order to establish its claims, the Commission will need to prove that:
- the tiered rebate provisions in Winstone’s arrangements with its customers had the purpose, effect or likely effect of substantially lessening competition in a relevant market (a breach of s 27 of the Act); and/or
- that Winstone had a substantial degree of market power and took advantage of that power through offering retroactive tiered rebates for a proscribed purpose (a breach of the previous version of s 36 of the Act).
Relevantly, the Commission previously investigated Winstone for similar conduct in 2014 but ultimately did not take further action at the time because, based on the evidence gathered, it could not conclude that Winstone had breached the Act.
Our experts’ view
This is the first case in which the Commission has sought to challenge rebate arrangements under the Commerce Act. It follows a lengthy investigation by the Commission and is consistent with the direction it was given by the Minister of Commerce and Consumers Affairs in its letter of expectation to “[use] the litigation fund to its full effect” under both competition and consumer laws. Other recent competition litigation the Commission has pursued includes the first criminal cartel prosecution filed in December 2023 for bid-rigging in the construction sector, and civil proceedings against Foodstuffs North Island Limited for lodging anti-competitive land covenants which blocked competitors from opening competing supermarkets and developing existing supermarkets in relevant areas (see our previous alert for more details on the Foodstuffs case).
Please contact our team if you have any questions in relation to the use of rebates in your business or the Commission’s current enforcement approach and how it may impact your business.
This article was co-authored by Soomin Yang, a Solicitor in our Competition team.
