Cement firms face action over 'failure to compete' on pricing

 

Britain's major cement firms were today facing "hard-hitting" action after a regulator accused them of failing to compete on pricing.

The Competition Commission said there were serious problems in the way the cement market operates in the UK, with customers facing higher prices because the producers know too much about each other's businesses.

It estimated that this behaviour could have cost consumers around £180 million between 2007 and 2011, adding that it was looking at a wide range of remedies to increase competition.

Commission deputy chairman Martin Cave said the three major players, Lafarge Tarmac, Cemex and Hanson, have concentrated on retaining their respective market shares rather than competing to the full.

He added: "Strikingly, despite low demand for cement over recent years, prices and profitability for the British producers have still increased."

The watchdog said there was no explicit collusion between the firms; rather, there were conditions which allow them to coordinate their behaviour.

Mr Cave said: "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."

Possible remedies could include requiring the firms to divest of cement plants as well as prohibiting generalised price announcement letters.

Mr Cave added: "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."

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