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Lafarge and Tarmac merge referred to Competition Commission

The Office of Fair Trading has referred a proposed UK construction materials joint venture between Anglo American and Lafarge to the Competition Commission.

Lafarge and Tarmac merge referred to Competition Commission

The parties propose to establish a 50:50 joint venture to which each of them would contribute the bulk of their construction materials businesses in the UK.

The proposed joint venture involves overlaps between activities in a number of product markets, at local, regional and national level. In addition, there are vertical supply relationships between the parties, which could have an impact on the ability of suppliers to compete.

The OFT received information from around 300 customers and competitors of the two parties as part of its investigation and concluded that competition concerns arise in a number of markets that justify referral to the Competition Commission.

These are:

  • overlaps in the supply of aggregates, asphalt and ready-mixed concrete in a large number of local areas

  • an overlap in the supply of bulk grey cement at a regional and/or national level, as well as, separately, an increased prospect of coordination in the supply of bulk grey cement, and

  • a concern that the joint venture could foreclose independent ready-mix concrete suppliers by making it substantially more difficult for them to source bulk grey cement at competitive prices.

    Ali Nikpay, OFT senior director and decision maker in this case, said: “The proposed joint venture would bring together Tarmac’s and Lafarge’s construction material assets in the UK. This represents a significant structural change in this sector and raises serious competition issues in several markets which need to be considered in detail by the Competition Commission.”

    Last month the Competition Commission announced an inquiry into the £3.4bn cement and aggegates sector, amid concerns that the dominance of the big players is raising prices and making it difficult for new entrants to join the market.

    Five companies – Lafarge, Holcim, Heidelberg, Cemex and Anglo American – account for more than 90% of the cement market, 75% of aggregates sales and 70% of ready-mix concrete production in the UK.

  • About Fiona Russell-Horne

    Fiona Russell-Horne
    Group Managing Editor across the BMJ portfolio.

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