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OFT warns of poor competition in aggregates

The Office of Fair Trading (OFT) has proposed to refer the aggregates, cement and ready-mix concrete sectors to the Competition Commission due to a number of features which could prevent, restrict or distort competition.

In its study the OFT identified that both structural features of the sectors may dampen competition, along with the conduct of major firms towards smaller operators.

Issues include:

  • High barriers to entry in aggregates and cement due to the difficulty of obtaining planning permission and the level of investment required
  • High and increasing concentration: five major players account for over 90% of the cement market, 75% of aggregates sales and 68% of ready-mix production
  • The effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement. Complaints have been made about vertically integrated firms refusing to supply or discriminating against non-integrated competitors through their pricing

OFT chief executive John Fingleton said well functioning markets were crucial to economic growth and these sectors were fundamental to the entire 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 on its proposal to refer the market to the Competition Commission.

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