• rmacculloch

The Economics of the "Barriers-to-Entry" Fletcher Gib Board Monopoly

One of NZ's most experienced and decorated business reporters, Tim Hunter at the National Business Review writes:

"Fletcher, meanwhile, has been happy to cultivate & harvest its [Gib plasterboard] monopoly for years .. [One] would do well to consider the strange feature of NZ’s construction sector that uses the material as structural bracing .. In NZ, builders of light timber-framed dwellings can use an off-the-shelf compliance regime called NZS3604, which was last updated in 2011. Meet that standard & the building will comply with the Building Code.

NZS3604 .. says bracing elements must be tested using the Branz P21 test procedure specific to NZ. Winstone’s Gib board has been tested according to that standard, but it’s not something routinely done by overseas manufacturers. Importers can get the test done but at extra time & cost, so in the current shortage there is a barrier to entry for new products .. the requirement for a P21 test in NZS3604 was introduced either in 1999 or through a 2006 amendment".

In other words, this appears to be a case of regulations not being made in the public interest but instead either being:

".. acquired by the industry and designed and operated primarily for its benefit ... Because stricter regulation raises barriers to entry, it should lead to greater market power and profits rather than benefits to consumers"


".. being pursued for the benefit of politicians & bureaucrats .. Politicians use regulation to create rents & to extract them through campaign contributions, votes, and bribes".

These quotes and rationales for regulation were laid out in an article called "The Regulation of Entry" by Djankov, La Porta, Lopez de Silanes and Shleifer in 2002:

The NBR article can be found here: