The OFT has today published its market study into aggregates, cement and ready-mix concrete. It proposes to refer the sectors, collectively worth £3.4bn in 2009, to the Competition Commission for more detailed investigation.
The OFT will now consult until 30 September 2011 before making a final decision on a referral.
In its study the OFT identified a number of features of the sectors that could prevent, restrict or distort competition. These relate both to structural features that may dampen competition, and to the conduct of major firms towards smaller operators.
- The effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement. OFT has received complaints about vertically integrated firms refusing to supply or discriminating against non-integrated competitors through their pricing.
- An apparent squeeze between rising cement prices and stable or falling ready-mix concrete prices, affecting independents which both buy cement from vertically-integrated majors and compete against them in the ready-mix concrete market.
The OFT’s statement appears to suggest that the recent announcement of UK tie-up between Anglo American and Lafarge may have triggered its unease. Subject to regulatory approval, the two want to form a 50:50 JV combining their UK operations, including Tarmac and the former Blue Circle business (now Lafarge Cement UK).
OFT chief executive John Fingleton said: “More than ever, well-functioning markets are crucial to economic growth. Aggregates, ready-mix concrete and cement, important in their own right, are also fundamental to the wider construction industry.
“We are concerned that competition is not working well in these sectors, with underlying features of the market giving rise to persistent concerns. Lack of effective competition not only affects the public sector and business customers but ultimately leads to higher prices for consumers too.
"As a result we are proposing to refer these sectors to the Competition Commission for further investigation.”
The OFT will be speaking with key parties directly. Others who wish to make a submission can send their views to email@example.com