Displaying items by tag: Cartel

Cement cartels (or at least cases of cartel-like behaviour) have reared their ugly heads this week... again. In two different markets, Australia and Brazil, competition authorities are at various stages of taking major action against large proportions of their respective cement industries. In another, Europe, it is the cement producers that are taking on the authorities.

This week, the Australian Federal Court has found five producers guilty of agreeing anti-competitive contracts with regard to fly-ash supply contracts from power stations in the state of Victoria. Only Cement Australia Holdings was not accused. Penalties are to be determined at a later date – watch this space.

As drastic as the Australian situation may be, it is Brazil's anti-trust authority Cade that looks set to make the biggest 'splash' in a cement industry in 2014. On 13 March 2014 it was reported that a US$1.32bn fine, split over six cement producers, has been put on hold after the producers disputed a ruling that would see them lose an average 24% of their cement assets each. So big is this fine that it actually eclipses the US$1.1bn fine seen in India in 2012. In light of the amount of influence that they look set to lose, it now looks extremely likely that the producers will appeal. This sets the scene for indeterminably long waits for legal proceedings and more evidence to be collected. Whatever happens in Brazil, there will be major implications for its increasingly-concentrated cement market.

Elsewhere, in a strange inversion of the normal situation, in Europe it is the cement producers that are taking action. This week the European Court has rejected an appeal from eight major cement producers including Holcim, HeidelbergCement and Cemex subsidiaries with respect to the European Commission's handling of an anti-cartel investigation that began in 2008. That case saw anti-trust investigations start in 2010. Proceedings continue.

As stated previously in this column, cartel-like behaviour is not necessarily indicative of a formal cartel. There are innumerable factors that make every case different and, in each, proving actual collusion is very hard indeed. In the cement industry however, it appears that 'convictions' in cartel cases are easier to spot than in other sectors.

"The first thing for any new competition regulator is to go out and find the cement cartel. My experience of this subject is, it is always there, somewhere," wrote Richard Whish, a Professor of Law at King's College London in 2001. "The only countries in which I had been unable to find the cement cartel is where there is a national state-owned monopoly for cement."

The authorities will keep looking and producers, guilty or not, will continue to wait for their call.

Azerbaijan: Cement production has risen year-on-year by 3.8% to 2Mt/yr in 2013, a historic high. However despite two new entrants to the industry, Eyyub Huseynov, the Chairman of the Union of Free Consumers of Azerbaijan, has attributed continuing high cement prices to cartel-like behaviour, according to the Turan Information Agency. Huseynov has called for faster adoption competition legislation by parliament..

In 2013 the cement production capacity of Azerbaijan increased by at least 3Mt. According to the State Customs Committee, the value of cement exports from Azerbaijan increased by 15% to US$153m in 2013. In 2012, Azerbaijan imported 1.03Mt of cement for building at a declared cost of US$85m. 11Mt of clinker was also imported at a value of US$46m.

Brazil: Brazil's antitrust regulator is likely to impose US$1.3bn of fines on six cement producers that were allegedly part of a cartel in the Latin American country.

On 22 January 2014, four of the five members of the board of Brazil's Administrative Council for Economic Defense (Cade) voted for the penalties, while the remaining member requested a review of the process. Under the regulator's rules, during the review period Cade members can change their votes. Cade didn't offer a timetable for a final decision.

According to the current proposal, Brazil's Votorantim Cimentos would be fined US$657m and Switzerland's Holcim would receive a penalty of US$214m. Itabira Agro Industrial would be fined US$173m, Cimpor Cimentos would receive a penalty of US$126m and InterCement, a subsidiary of Camargo Correêa group, would be fined US$102m. In addition, Itambe would receive a fine of US$37.1m. Representatives for companies involved in the investigation couldn't be immediately reached for comment.

Cade said that the cement cartel, which allegedly existed from 1986 - 2007 according to the regulator's investigation, led to increased prices that were passed on to consumers.

Poland: The Court of Competition and Consumer Protection (SOKiK) has upheld a decision by the Office of Competition and Consumer Protection (UOKiK) to fine seven cement companies for forming a cartel. However, the SOKiK lowered the total fine from Euro100m to Euro80m. According the UOKiK the cartel fixed prices and divided the Polish market among themselves for at least eleven years.

According to the UOKiK the cartel activities could have had negative consequences for the construction sector and had affected consumers. The cartel had almost 100% share of production and sale of grey cement in Poland.

During the investigation two cartel members decided to co-operate with the UOKiK in exchange for leniency. Therefore UOKiK decided not to fine Lafarge Cement and lowered the fine for Gorazdze Cement. The remaining five cartel members - Grupa Ozarow, Cemex Polska, Dyckerhoff Polska, Cementownia Warta and Cementownia Odra - were fined to the full legal extent, 10% of annual turnover.

India: The Indian Realtors' body CREDAI has said that cement prices across India had gone up by US$0.95-1.12/bag in the week to 23 September 2013 and that it was considering an approach to the fair trade regulator Competition Commission of India (CCI) alleging a cartel between the cement producers.

CREDAI chairman Lalit Kumar Jain said that cement prices in Pune had risen by 31% in just a week. "Considering that buyer sentiment is currently low, the cement price rise defies logic," he said. "We feel that there is a cartel. We are currently taking legal advice."

Tanzania: Pascal Lesoinne, the chairman of the East African Cement Producers' Association (EACPA), has denied that a cartel exists in the Tanzanian cement market. His comments arose at a press conference in Dar es Salaam following action by the Tanzanian government to investigate cement imports from Pakistan.

"Repeated accusations of there being a cartel are nonsense as competition is fierce in the market and there are many players. Cement is a hot cake of which everybody wants to have a share," said Lesoinne in a presentation on the benefits of the cement industry to Tanzania's economy. Leading cement producers in Tanzania include HeidelbergCement, Afrisam and Lafarge. Lesoinne cited taxation and jobs as two principal benefits of Tanzania's local cement industry.

Confederation of Tanzania Industry (CTI) figures indicate that in 2012 over 200,000t of cement were imported from Pakistan to Tanzania. Industry players say it is difficult for local manufacturers to compete with imports, largely due to high costs of production in the country, with electricity costs in Tanzania being four times higher than in China and Egypt, according to EACPA figures. Lesoinne called for the government to create a 'level playing field' between locally produced and imported cement.

In late July 2013 the Tanzania government formed a seven person team to investigate alleged subsidies, tax evasion and the quality of cement imported from Pakistan.

India: The Indian Supreme Court (SC) today refused to give interim relief to cement manufacturers in their appeal against the interim penalty imposed on them on charges of forming a cartel, confirmed for now by the Competition Appellate Tribunal (CAT). It did, however, delay the deadline for the penalty by over a week.

The CAT had told the companies to pay 10% of the total US$1.1bn penalty imposed by the Competition Commission of India (CCI) by 16 June 2013 and it posted their main appeal for August 2013. The manufacturers appealed against this to the SC. Now the deadline for payment has been moved from Sunday 16 June 2013 until Monday 24 June 2013. However, the court insisted on their complying with the CAT's interim order.

The order was imposed by CCI against 11 major cement producers including ACC, UltraTech and Ambuja and their association. The apex court refused to lift the penalty order or reduce the rate, despite long arguments over two days by senior counsel Abhishek Singhvi for UltraTech Cement and Ranjit Kumar for Jaiprakash Associates. According to the modified order, the amounts shall be deposited with the tribunal and kept in a separate fixed deposit with a nationalised bank. The deposit shall be renewable after six months. The amounts deposited, with interest, shall be dealt with by the tribunal at the time of the disposal of the appeals of the cement companies.

The case was originally filed by the Builders Association of India before the CCI, alleging cartelisation by the cement companies. The director general (investigation) of the CCI found evidence of formation of a cartel by the cement companies, with capacity utilisation held down to control prices. The penalty was calculated on the basis of the annual turnover of the companies in question over a certain period.

India: On 11 June 2013 the Supreme Court admitted the appeals of several cement manufacturers against a Competition Appellate Tribunal (CAT) order, which directed the cement companies to pay a penalty for allegedly forming a cartel. The case is scheduled to come up towards the end of the week ending 14 June 2013 after the reply of the Builders Association of India (BAI).

The cement companies argued that the penalty, fixed ad hoc at the rate of 10% of their worth, was huge and unjustified. If the firms do not pay the penalties, their appeal case (before CAT) will be automatically dismissed, according to the CAT order.

UltraTech Cement Ltd, argued that CCI did not find any prima facie case against the 11 companies picked by the association out of 42 major cement manufacturers but still the CAT imposed a penalty in an interim order. The deadline for payment of the penalties is 16 June 2013.

Among the cement manufacturers that have appealed to the Supreme Court against the CAT order are Jaiprakash Associates, Century Textiles & Industries and Madras Cements.

Turkey: Turkey's Competition Authority said on 11 June 2013 that it had launched a probe into the local cement producers Çimsa Çimento and Oyak Adana Çimento on allegations of price setting.

The authority said that data gathered during a preliminary inquiry was sufficient to open an investigation into whether or not the two companies had violated competition regulations by setting prices for white cement.

India: The Competition Appellate Tribunal (COMPACT) has ordered cement producers to pay 10% of a US$1.15bn fine imposed on them by the Competition Commission of India (CCI) for a price-fixing cartel. The tribunal asked 11 Indian cement producers to pay the fine within 30 days otherwise their appeal against the fine will be dismissed.

COMPAT had reserved its order over a batch of petitions filed by various cement producers and the Cement Manufacturer's Association (CMA) on 18 March 2013 after hearing them on an interim plea. In the petitions, the cement producers had challenged US$1.15bn penalty imposed on them by the Competition Commission of India (CCI) and a US$133,000 fine imposed on the CMA. The cement companies charged with cartel behaviour include Lafarge India, India Cement, JP Associates, Binani Cement, Ambuja Cement, Madras Cement and J K Cement.

The CCI had found cement producers were in violation of the provisions of the Competition Act, 2002 which deals with anti-competitive agreements, including cartels. The order was passed following probe by CCI Director General (Investigation) on a complaint filed by Builders Association.