Only last week we heard news that fuel companies have been colluding to fix fuel prices and now we hear that the cartel that is the cement industry has been fixing cement prices.
Fuel and cement are two commodities the landscape industry just cannot operate without.
Just five providers account for ninety percent of the UK's cement market, seventy-five percent of aggregates and sixty-eight percent of ready-mix concrete.
Back in 2011 the Office of Fair Trading asked the Competition Commission to investigate the cement industry over concerns for the lack of competition.
The industry is worth some £4 billion each year to the UK economy.
The five major producers of heavy building materials in the UK: Aggregate Industries, Cemex, Hanson, HCM and Lafarge Tarmac. HCM is a new firm established in January 2013.
Estimates are that a lack of competition between these companies had cost consumers as much as £180m between 2007 and 2011.
Yesterday the Competition Commission provisionally concluded that coordination between the three major cement producers (Lafarge Tarmac, Cemex and Hanson) in the cement market is likely to be resulting in higher prices for all cement users.
The Competition Commission is planning a wide range of measures to break open the cement market in the United Kingdom after provisionally finding that both structure and conduct in the sector limit competition by aiding coordination between certain UK producers.
Measures include requirements for the major producers to divest cement plants (and RMX operations as part of the remedy to coordination in cement); the creation of a cement buying group; prohibiting generalised price announcement letters to customers and restrictions on making available other information which can aid coordination.
Professor Martin Cave, CC Deputy Chairman and Chairman of the Inquiry Group, said:
‘We have provisionally found some serious problems with the way the cement market operates in GB. In a highly concentrated market where the product doesn’t vary, the established producers know too much about each other’s businesses and have concentrated on retaining their respective market shares rather than competing to the full. Strikingly, despite low demand for cement over recent years, prices and profitability for the GB producers have still increased.
‘There are only four cement producers in the UK and one of those is a new entrant to the market. This concentration—and the close links between the producers at many levels—along with industry practice, has for a long time given GB producers detailed awareness of how their counterparts are performing, as well as of their future pricing strategy.
‘Established information channels such as price announcement letters can signal their plans, and tit-for-tat behaviour and cross-sales can be used to prevent or retaliate against any moves to disturb the overall balance between the different players in this market. They have also been in a position to increase the already significant barriers that exist for new entrants.
‘Our finding does not mean they are explicitly colluding or operating a cartel because there are already several ways of communicating each other’s intentions without the need for specific discussions.
‘Given the extent of the problems we have found, we feel that hard-hitting measures may be necessary to open up the cement market to greater competition by transforming existing structures and behaviour. The fundamental importance of this product to construction and building and the amount of such work that is funded by the public purse only underlines the need for these actions. Our initial assessment is that these problems could have cost GB consumers around £180 million over the period 2007 to 2011, and we also believe this could be an underestimate.’
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