RMC faces fine after German cartel inquiry

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The Independent Online
RMC, the ready-mixed concrete group, is facing a fine of up to pounds 26m as a result of an investigation by the German Federal Cartel Office into alleged price fixing in eastern Germany.

In a statement RMC said: "While it is too soon to make any accurate estimate of the size of any such fines, there is a possibility that they may, in total, be material in the context of the group's profits."

It is thought that the fine could be 10 per cent of RMC's profits, which were pounds 256m last year. RMC shares fell almost 5 per cent to 1,062p yesterday.

Over 50 companies, including six RMC subsidiaries, are involved in the investigation, which centres on the region around Berlin.

The market was invaded by huge numbers of companies in the early 1990s after the collapse of the Berlin Wall, as construction businesses sought to take advantage of the huge redevelopment programme.

While new entrants cut prices to gain market, share the allegation is that since then, several operators have struck illegal market-sharing agreements designed to keep prices high.

Many of the biggest German companies are also involved in investigation, including Heidleberger and Dykerhoff. However, RMC has the biggest local market share at around 22 per cent.

RMC has about 300 ready-mixed concrete plants in and around the Berlin area. A high number of plants are required because the product is not easily transportable over more than 20 or 30 miles, and has a finite life.

However, this means that the industry tends to lend itself to local monopolies as firms seek to dominate specific areas.

RMC has been the subject of cartel fines before. In the UK, where RMC is the market leader with a 28 per cent share, the company was fined pounds 4m in the early 1980s after allegations of price fixing. It was fined a further pounds 3m for alleged predatory pricing in 1993, although that fine is the subject of an appeal.

Germany has long been a difficult market for RMC, which chose to concentrate on Europe while its rivals - such as Hanson - focused on the United States and Blue Circle targeted Asia.

Germany accounts for 28 per cent of RMC's sales, but the company's progress has been hampered by the German economy, which turned down almost as soon as RMC entered the market.