The Office of Fair Trading is referring the UK aggregates sector to the Competition Commission for a more detailed investigation.
The OFT’s move comes as it publishes its market study into aggregates, cement and ready-mix concrete.
The sector, worth around £3.4bn is dominated by just five players – mainly due to a massive wave of consolidation – Aggregate Industries, Cemex, Heidelberg Cement, Lafarge, and Tarmac. They account for 90% of the UK cement market, 75% of aggregate sales and 68% of ready-mix production.
The OFT also highlighted the high barriers to entry in aggregates and cement due to the difficulty of obtaining planning permission and the level of investment required and the effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement.
It says that smaller firms have complained about refusal to supply or discrimination against non-integrated competitors through pricing.
The study also found concerns about 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.
John Fingleton, OFT Chief Executive, said: “‘More than ever, well-functioning markets are crucial to economic growth. Aggregates, ready-mix concrete and cement, important in their own right, are also fundamental to the wider construction industry.
“We are concerned that competition is not working well in these sectors, with underlying features of the market giving rise to persistent concerns. Lack of effective competition not only affects the public sector and business customers but ultimately leads to higher prices for consumers too.”
The OFT will now consult until 30 September 2011 on its proposal to refer the market to the Competition Commission. It will be speaking with key parties directly. Others who wish to make a submission should send their written views to: firstname.lastname@example.org