Construction materials joint venture could threaten competition

22 February 2012

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22 February 2012 | Angeline Albert

The Competition Commission (CC) has raised concerns that a proposed joint venture for construction materials would make the market uncompetitive.

In a provisional decision, the CC said the joint venture to create a new construction materials business between Tarmac, a subsidiary of Anglo American, and Lafarge meant the global firms’ overlapping services of producing and supplying cement, aggregates, asphalt and ready-mix concrete could lead to a lack of competition for these products. The Office of Fair Trading (OFT) referred the case to the CC last September.

Chairman of the Anglo/Lafarge inquiry group Roger Witcomb said in a statement: “In bulk cement there are currently only four UK producers and there is evidence the market is not as competitive as it could be. Prices and profit margins haven’t been affected in the way we would have expected following the big falls in the demand for cement in the past few years.”

He added: “The tie-up could also reduce competition for two specific aggregates products—rail ballast and high purity limestone used for flue gas desulphurization—because of the shortage of alternative suppliers.” High purity limestone is used in the abatement of acid gas emissions from coal-fired power stations.

Potential remedies to mitigate the anti-competitive effects of the joint venture included the companies selling off certain cement and ready-mix concrete operations. The CC is inviting the public to comment on its provisional findings and proposed solutions. The final report must be published by 1 May.

A spokesman for Anglo American said: “We continue to work with the Competition Commission to address the issues raised in their provisional findings and continue to believe in the strategic rationale of the transaction.” 

Lafarge has not yet responded to SM’s request for comment.

Last month the OFT referred the market for aggregates to the CC, with concerns over the high concentration of suppliers and high barriers to entry.


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