Introduction
Market investigation
Recommendations of report
Comment


Introduction

In August 2022, the Competition Authority (GVH) closed its accelerated sector inquiry into the market for insulation materials, providing recommendations to manufacturers, the public, waste management operators and the legislator, aiming to decrease product prices and issued its report on 26 August 2022.

The legislator conferred to the GVH the power to conduct accelerated sector inquiries to enable the competition authority to quickly and efficiently assess competitive conditions in a market in 2021.

Market investigation

The current accelerated inquiry is the fifth that the GVH has carried out so far, with previous investigations covering the markets for:

  • covid-19 antigen and antibody rapid tests;
  • ceramic masonry elements; and
  • wooden building materials.

The choice of market is not a coincidence; the price of construction materials has risen sharply and significantly over the past few years, affecting many segments of the economy. The results of the accelerated sector inquiry confirm that the producer or importer prices of the three insulation products under investigation (ie, mineral wool, expanded polystyrene (EPS) and extruded polystyrene (XPS)) have increased by 61% on average over the past three years. According to the report, the price increase is due to:

  • higher prices for energy inputs for production (ie, oil, electricity and natural gas);
  • higher prices for imported raw materials used in production due to exchange rate depreciation; and
  • an increase in demand.

The inquiry has not revealed any circumstances that would justify opening competition supervision proceedings; however, it did identify certain adverse market factors. To mitigate these factors, the GVH proposed a number of measures, most of which focus on sustainability goals.

Recommendations of report

The GVH encourages manufacturers to increase their production capacity. To compensate for the significant increase in raw material prices, greater emphasis should be placed on the integration of waste materials and recovered products into the manufacturing process, such as recycling and developing the necessary technological background. Recycling can help manufacturers to address possible shortages of raw materials and reduce production costs, which can be reflected in consumer prices. The GVH also calls on manufacturers to pay more attention to environmental, social and governance aspects when planning their transport and haulage capacities.

For the public, the GVH suggests that clients and designers consult with the insulation contractor as early as possible to determine the types of insulation materials to be used, taking into account the current price and availability. The accelerated sector inquiry has revealed that substitution possibilities exist among the different insulation materials concerned. However, as insulation is included in technical and fire protection plans, there is no possibility for subsequent modification once these plans have been adopted, which the report points out.

Further, waste management operators are recommended to adapt the selective waste collection system in a way that the public can simply drop off styrene and polystyrene packaging materials free of charge at several locations. The clean product collected could be sold to domestic EPS and XPS manufacturers, which could allow for cost-effective recovery raw material for production from the recycled packaging materials.

Finally, the GVH advised the legislator to keep the demand for insulation products stable in the long term by means of various state subsidies for housing and building renovation, in order to avoid occasional extreme fluctuations in demand. This will help in planning production capacity and investment decisions by manufacturers, which will provide more certainty on the supply side of the market and a better chance of avoiding product shortages.

Comment

Market players were able submit comments on the draft report published on 5 August 2022 until 15 August 2022. The GVH published the final report on its website on 26 August 2022.

The stakeholders did not submit any comments, therefore the content of the final report has not changed compared to the previously published draft. However, it makes sense for stakeholders to submit comment in such proceedings, as such comments may not only reach the GVH, but also the decision-makers and the public, due to the publication of the report.

Market players should also be aware that the GVH may also conduct on-site investigations (so-called "dawn raids") in the context of accelerated sector inquiries. The same happened in this case, the GVH carried out several dawn raids at the premises of both insulation material manufacturers and building material distributors, collecting data and information from the companies concerned. As long as there are disturbances in the market for insulation materials, players should expect that the GVH will continue to closely monitor market developments. However, this can also be expected in other building material markets.

For further information on this topic please contact Anna Turi or Bálint Szabó at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email ([email protected] or [email protected]). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.