The OFT found that the merger raised “a realistic prospect of a substantial lessening of competition in the supply of primary aggregates, asphalt and ready-mix concrete in a number of local areas in the north of Scotland”.
Breedon paid Aggregate Industries £34m for 11 aggregates quarries (six of which are active), four asphalt plants (including associated contracting services), seven ready-mix concrete plants (and two mothballed plants), and two concrete block factories in the Grampian, Tayside and Fife, Highlands and Hebrides regions of Scotland. (See our previous reports HERE and HERE.)
The OFT's investigation examined production levels, the number of competing suppliers, the proximity of suppliers' quarries and plants to each other and market shares within local catchment areas, as well as profit margins. The OFT decided that, pre-merger, the parties were strong competitors with combined market shares in excess of 40 or 50% in a number of areas. Customers expressed significant concerns that the merger may result in higher prices or a worsening of service levels.
The parties submitted an offer to remedy the competition lost by the merger but it did not address all of the OFT's concerns. Therefore, the OFT has decided to refer the merger to the Competition Commission for a more detailed investigation.
OFT senior director Sheldon Mills, the decision maker in this case, said: “Aggregates, asphalt and ready-mix concrete are essential to a wide variety of local infrastructure projects for public and private construction work alike.
“Our investigation indicates that Breedon and Aggregate Industries were close competitors and the merger may lead to a strong market position in a number of local areas in the North of Scotland sufficient to lead to increased prices for public sector and business customers. We consider it appropriate for the Competition Commission to conduct an in-depth investigation into this completed merger.”
The Competition Commission has until 10 March 2014 to report.
To submit evidence, email: Breedon-AI@cc.gsi.gov.uk