Watchdog vows to break-up cement market

Grant Prior 9 years ago
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The Competition Commission is planning to break open the UK cement market and force industry giants to sell-off parts of their business.

The watchdog is worried that “co-ordination” between industry giants Lafarge Tarmac, Cemex and Hanson is “likely to be resulting in higher prices for all cement users.”

The fourth major supplier – Hope – is a new entrant to the market.

The commission has stopped short of accusing producers of collusion.

But is said suppliers “have an unusually high level of understanding of each other’s businesses,”

The commission added: “This has created conditions which allow three of them to coordinate their behaviour, thereby softening competition and resulting in higher prices for consumers.”

Suggested measures to increase competition include requiring the major producers to divest cement plants, the creation of a cement buying group, prohibiting generalized price announcement letters to customers and restrictions on making available other information which can aid coordination.

Professor Martin Cave, CC Deputy Chairman and Chairman of the Inquiry Group, said: “We have provisionally found some serious problems with the way the cement market operates in GB.

“In a highly concentrated market where the product doesn’t vary, the established producers know too much about each other’s businesses and have concentrated on retaining their respective market shares rather than competing to the full.

“Strikingly, despite low demand for cement over recent years, prices and profitability for the GB producers have still increased.

‘There are only four cement producers in the UK and one of those is a new entrant to the market.

“This concentration—and the close links between the producers at many levels—along with industry practice, has for a long time given GB producers detailed awareness of how their counterparts are performing, as well as of their future pricing strategy.

“Established information channels such as price announcement letters can signal their plans, and tit-for-tat behaviour and cross-sales can be used to prevent or retaliate against any moves to disturb the overall balance between the different players in this market.

“They have also been in a position to increase the already significant barriers that exist for new entrants.

“Our finding does not mean they are explicitly colluding or operating a cartel because there are already several ways of communicating each other’s intentions without the need for specific discussions.

“Given the extent of the problems we have found, we feel that hard-hitting measures may be necessary to open up the cement market to greater competition by transforming existing structures and behaviour.

“The fundamental importance of this product to construction and building and the amount of such work that is funded by the public purse only underlines the need for these actions.

“Our initial assessment is that these problems could have cost GB consumers around £180 million over the period 2007 to 2011, and we also believe this could be an underestimate.”

The commission is required to publish its final report into the cement market by 17 January 2014.

Any interested party is invited to respond to the provisional findings and notice of possible remedies by 12 June 2013.

To submit evidence, please email aggregates@cc.gsi.gov.uk

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