THE Competition & Markets Authority (CMA) announced it has found that Breedon’s purchase of certain Cemex assets ‘raises competition concerns’ in the supply of building materials in some parts of the UK.
Breedon and Cemex Investments Limited are two of the leading producers and distributors of construction materials in the country. Breedon announced in January that it had agreed a £178 million deal to buy approximately 100 Cemex sites, including aggregates quarries, ready-mixed concrete facilities, asphalt plants and a cement terminal.
Following its initial Phase 1 investigation, the CMA revealed that it found the deal gives rise to competition concerns in relation to the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets across the UK. In all of these local markets, the CMA said the two businesses currently have a large presence and compete closely, with ‘limited competition’ from other suppliers.
The CMA added that it has also found that the merger could make it easier for cement suppliers in the east of Scotland to align their behaviour, without necessarily entering into any express agreement or direct communication, in a way that limits the rivalry between them. The CMA found this could result in cement suppliers competing less strongly for certain customers in the region.
The CMA said it is therefore concerned that the deal could result in a ‘substantial lessening of competition’, leading to higher prices and lower quality building materials for construction projects.
Breedon and Cemex must now address the CMA’s concerns within five working days. If they are unable to do so, the merger will be referred for an in-depth Phase 2 investigation.
Colin Raftery, CMA senior director said, “These products are widely used in a range of building projects across the UK, and account for a material part of the construction costs faced by businesses and public bodies. As the majority of these materials are sourced locally, it’s vital to ensure that enough competition will remain at the local level so there’s enough choice and prices remain fair.
“While sufficient competition will remain in most areas, we are concerned that the deal could result in high prices and lower quality products in some areas where Breedon wouldn’t face sufficient competition.”