OFT refers Anglo American/Lafarge JV to Competition Commision

THE Office of Fair Trading (OFT) has today referred the proposed UK construction materials joint venture between Anglo American plc and Lafarge SA to the Competition Commission for further investigation.

Anglo American, through its UK subsidiary, Tarmac Ltd, and Lafarge 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.

According to the OFT, the proposed joint venture involves overlaps between the parties’ activities in a number of product markets, at local, regional and national levels. In addition, the OFT says vertical supply relationships arise between the parties’ activities, which may impact on the ability of suppliers in certain markets to compete.

Both parties are said to have provided a significant quantity of information and analysis to the OFT to inform its review. The OFT also received information from around 300 customers and competitors of the two parties as part of its merger investigation.

The OFT has concluded that competition concerns arise in a number of markets that justify a reference of the proposed joint venture to the Competition Commission. These are: overlaps in the supply of aggregates, asphalt and ready-mixed concrete in a large number of local areas (as well as particular types of aggregates at regional and national level); an overlap in the supply of bulk grey cement at a regional and/or national level, as well as, separately, an increased prospect of co-ordination in the supply of bulk grey cement; and a concern that the joint venture could foreclose independent ready-mixed 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…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.

‘Although the parties did offer to divest a variety of assets in order to try to resolve the issues identified, we are not confident that the package proposed would clearly remove our concerns in all areas.’