The OFT suspects that the structural features of these markets are preventing, restricting or distorting competition.
The decision to make a market investigation reference follows the publication of the OFT's market study and its announcement of a provisional decision to refer these markets in the UK in August 2011.
After public consultation on its provisional, the OFT said it remains suspicious and that competition may not be working well in Great Britain. Northern Ireland has been given the all clear.
A particular source of concern was an alleged squeeze between the price of cement upstream (supplied by the majors) and the price of concrete downstream. The scope of the study was therefore extended to cover cement and ready-mix concrete.
OFT chief executive John Fingleton said: “Competitive, well-functioning markets are important to drive economic growth and keep costs low. The aggregates, cement and ready-mix concrete markets are part of the larger construction industry which provides vital inputs across the British economy.
“Following public consultation, we continue to have concerns that these markets are not working well. As a result we are referring them to the Competition Commission for further investigation.”'
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 per cent of the cement market, 75 per cent of aggregates sales and around 70 per cent of ready-mix production.
- The effects of vertical integration: the major firms are integrated across
- 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 full reasoning for the referral can be downloaded here.
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