Tarmac and Lafarge merger anti-competitive
Published: 22 February, 2012
LONDON: The Competition Commission has declared the proposed joint venture between Tarmac owner Anglo American and Lafarge anti-competitive.
Anglo American, through its UK subsidiary Tarmac, and Lafarge want to establish a 50:50 joint venture in the UK but the commission's provisional findings are that the merger could lead to a substantial lessening of competition in the markets the supply of bulk cement, rail ballast, high purity limestone, primary aggregates, asphalt, and readymix.
Chairman of the Anglo/Lafarge Inquiry Group, Roger Witcomb, said: "We have a number of concerns about this joint venture.
"In bulk cement there are currently only four UK producers, and there is evidence that 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.
"We have not reached a view on whether or not there has been coordination in the bulk cement market. But we are concerned that the proposed tie-up would increase the susceptibility of this market to coordination.
"Some of the reasons for this arise from the proposed combination of the cement businesses and some from the increased vertical integration that would result from the combination of their RMX businesses. Lafarge currently has a relatively small RMX business, while Tarmac has a relatively large one.
"This is a particularly complex investigation because of the number of different products, the varying degrees of substitutability between them, and the fact that cement is an input into RMX and aggregates are an input into both RMX and asphalt.
"In addition, for aggregates used in general construction applications markets are quite localized as a result of high transport costs compared with product value. The markets for asphalt and RMX are also localized, but for them the issue is perishability.
"We have therefore had to examine competitive conditions in a large number of local markets for these products in coming to our view on the likely effect of the proposed joint venture on competition.
"We are now consulting on the possible actions we could take in response to the reductions in competition we have found, bearing in mind the close links that exist between the different product markets."