Competition for the supply of key building products is not working as well as it could, says the Commerce Commission.

The watchdog has released its draft report into competition in the residential building supplies market.

There were two main factors negatively impacting competition, it said.

The commission said was too slow, costly and uncertain to get new products accepted and that must be improved.

It also raised concerns about rebates paid by established suppliers to merchants.

"Our preliminary view is that competition for the supply of key building supplies is not working as well as it could, and would be improved if it was easier for building products to be introduced and for competing suppliers to expand their business," Commerce Commission chair Anna Rawlings said.

It recommended introducing more compliance pathways and making it easier for new supplies to be introduced.