Chapter 7: An efficient distribution of building materials
Inefficient behaviour makes building materials more expensive.
Compared to other EU-countries, the costs of building are higher in Denmark. Recent years have seen initiatives to increase competition, but with no effect. This is why it is necessary to maintain the efforts.
The main distribution channels for building materials are wholesalers and lumber yards. Strong ties between the main manufacturers and wholesalers put existing trade patterns in a deadlock and prevent development of new, alternative sales and distribution channels.
Hence, The Competition Authority is prepared to intervene against dominant companies discriminating between various customers and distribution channels. This can be done by requiring dominant companies to write down and observe each and every term of sale. The authority is prepared to follow up on these initiatives by ordering companies to sell to any customer who meets the terms of sale.
If one looks at craftsmen’s purchase of building materials, prices are blurred and opaque. Discounts are very high because they are calculated from high list prices. Craftsmen use the list prices when invoicing their customers. This gives them a clear preference for high discounts rather than low prices. The result is an artificially high price level for the consumer, who has to pay the list price.
Price competition works better among the do-it-yourself (DIY) centres. It is – among other things – due to the fact, that prices are more transparent to the consumers and to the emergence of new discount DIY centres. For that reason, consumers must be aware that they can purchase building materials themselves, instead of getting them from the craftsmen. Quite often this will be cheaper.
(Henrik Gommesen, Klaus Larsen)