Probe into cost of road materials

18/08/2011
Highways Reporters

The Competition Commission is set to probe the £3.4bn aggregates, cement and ready-mix concrete markets following claims that prices are being kept too high.

Officials at the Office of Fair Trading have referred the aggregates market for further investigation following an initial probe into the sector.

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.

“As a result we are proposing to refer these sectors to the Competition Commission for further investigation.”

The main problem areas already highlighted by the OFT 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 per cent of the cement market, 75 per cent of aggregates sales and 68 per cent of ready-mix production

The effects of vertical integration: the major firms are integrated across aggregates, ready-mix concrete and cement. We have received complaints about vertically integrated firms refusing to supply or discriminating against non-integrated competitors through their pricing

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

An apparent squeeze between rising cement prices and stable or falling ready-mix concrete prices, affecting independents which both buy cement from vertically-integrated majors and compete against them in the ready-mix concrete market.
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