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A 12-month regulatory review and what to expect in 2013

Now is a good moment to reflect on the major competition cases of 2012 and what they mean for the construction industry going into 2013.

This year has seen a number of competition law developments in the construction industry. The UK authorities − both the Office of Fair Trading and the Competition Commission − have focused on the aggregates, cement and concrete markets in particular.

The European Commission has also taken a keen interest, applying the state aid rules to the UK aggregates levy and investigating cement manufacturers. The national competition authorities in other EU member states also have been considering these and related markets.

UK market investigation: aggregates, cement and RMX

Following its market study into the supply of aggregates, cement and ready-mix concrete (RMX), in January 2012 the OFT referred these GB construction material markets to the CC for detailed investigation. 

The CC has until January 2014 to determine whether any feature of the markets prevents, restricts or distorts competition and thereby gives rise to an adverse effect on competition (AEC). 

“Evidence suggests the market is susceptible to co-ordination due to concentration, barriers to entry and higher costs of imports”

Evidence from an updated Statement of Issues published by the CC suggests the market is structurally susceptible to co-ordination due to concentration, barriers to entry and higher costs of imports, as well as the behaviour of companies including price announcement letters, cross-sales and targeted retaliation. 

The CC will conduct further information gathering and meet the main parties before publishing its provisional findings and possible remedies required to address any identified AEC in March/April 2013. Possible remedies include divestment, restrictions on access to information and changes to the planning regime. 

UK merger inquiry: Anglo American/Lafarge

A proposed 50:50 joint venture between Anglo American (Tarmac) and Lafarge of their aggregates, asphalt, cement and RMX businesses was cleared by the CC subject to a divestment package.

“It was reported the proposed joint venture will complete in 2013 following agreement reached by the parties with Mittal Investments”

The joint venture will be allowed to proceed only once divestment has been completed and a suitable buyer has been identified and agreed for certain of the assets. 

In November, it was reported that the proposed joint venture will complete in 2013 following agreement reached by the parties with Mittal Investments to acquire most of the assets required to be divested.

EU state aid: aggregates levy

Following a number of European court applications and appeals, in March the General Court annulled the Commission’s 2002 decision approving the levy under state aid rules.

In the meantime, the Treasury continues to demand payment of the levy. The levy continues to be the subject of a challenge by the British Aggregates Association (BAA) in the UK Court of Appeal.

Cartel activity across Europe

The Commission continued its investigation into restrictive practices in the markets for cement and related products. Following appeals by five cement companies against requests for information from the Commission in 2011, in 2012 Lafarge also appealed an information request.

The Commission commenced formal proceedings against a number of manufacturers of cement, aggregates and RMX following a series of dawn raids throughout Europe in 2010. The Commission is investigating possible import/export restrictions, market sharing and price co-ordination.

Key developments expected in 2013

  • Provisional findings and possible remedies in the aggregates, cement and RMX investigation are expected in March/April 2013.
  • Tarmac/Lafarge: following reports that Mittal Investments may buy the divestment assets (see above), 2013 would see the merger completed.
  • It is expected that the Commission will now carry out a detailed investigation into the compatibility of the aggregates levy with state aid rules. The BAA’s appeal is due to be held in April 2013.
  • As the Commission and the CC both continue their investigations into cartel activity, 2013 is likely to be a year of scrutiny for companies involved with aggregates, cement, RMX and associated products.

Rebecca Owen-Howes is a senior associate at SNR Denton UK LLP

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