The Office of Fair Trading has formally referred the aggregates, cement and ready-mix concrete markets in Great Britain to the Competition Commission.
The decision follows the publication of the OFT’s market study and its announcement of a provisional decision to refer these markets in August last year.
The markets for supplying aggregates, cement and ready-mix concrete in the UK are worth about £1.4bn, £900M and £1.0bn respectively.
The OFT said that after carrying out a public consultation on its provisional decision and considering all the responses received, it remains of the view that competition may not be working well in Great Britain.
It has decided not to refer these markets in Northern Ireland because the features identified are not present to the same degree.
The OFT has particular concerns regarding structural features of these markets and said it has reasonable grounds for suspecting that these are preventing, restricting or distorting competition.
Industry body the Mineral Products Association said it “notes” the OFT decision and that it will continue to co-operate fully with the competition authorities.
Features the OFT identified in its market study include:
- High barriers to entry in aggregates and cement
- High concentration: five major players account for upwards of 90% of the cement market, 75% of aggregates sales and around 70% of ready-mix production
- The effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement
- 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.
The OFT said these features, in combination, may have the potential to reduce competition in settings with high levels of concentration, particularly given the largely homogenous nature of the products, and may lead to the erosion of independent competition in the medium to long-term. The effect in the long-term could be a further weakening of competition between the firms, resulting in higher prices for aggregates, cement and ready-mix concrete.