Following a public consultation, the OFT has referred the aggregates, cement and ready-mix concrete markets in Great Britain to the Competition Commission.
It announced the decision in August 2011 and has now decided to press ahead with the move after considering responses to its consultation, although the markets in Northern Ireland will not be referred as they are not considered to present the same issues.
The OFT has highlighted particular concerns regarding ‘structural features of these markets and reasonable grounds for suspecting that these are preventing, restricting or distorting competition’.
The commission is due to make a decision on the proposed joint venture between Anglo American and Lafarge next month after the OFT referred the case to the CC on 2 September 2011.
Breedon Aggregates yesterday announced its second acquisition in six months after it bought concrete firm Nottingham Readymix.
OFT chief executive John Fingleton said: “Competitive, well-functioning markets are important to drive economic growth and keep costs low. The aggregates, cement and ready-mix concrete markets are part of the larger construction industry which provides vital inputs across the British economy.”
The supply of aggregates, cement and ready-mix concrete in the UK has turnovers of about £1.4bn, £0.9bn and £1.0bn respectively.
Features the OFT identified in its market study include:
High barriers to entry in aggregates and cement.
High concentration: five major players account for upwards of 90 per cent of the cement market, 75 per cent of aggregates sales and around 70 per cent of ready-mix production.
The effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement.
Multiple contacts and information exchanges across the markets, with major firms supplying each other with both aggregates and cement, and engaging in joint-ventures and asset swaps.
These features in combination, the OFT finds, may reduce competition in settings with high levels of concentration, particularly given the largely homogenous nature of the products, and may lead to the erosion of independent competition in the medium to long-term.
The effect in the long-term could be a further weakening of competition between the firms, resulting in higher prices for aggregates, cement and ready-mix concrete
The OFT is not referring markets in Northern Ireland after it concluded it is likely to be a distinct market for the products and because the ‘features identified in Great Britain are not present to the same extent in NI’.