The Competition & Markets Authority (CMA) has given Breedon and Cemex five days to address its concerns about the impact of their recent transfer of building materials assets.
The competition watchdog is concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for UK construction projects.
Breedon announced in January this year 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, across the UK.
Following an initial phase one investigation, the CMA found that 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.
It was particularly concerned 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 that this could result in cement suppliers competing less strongly for certain customers in the region.
The CMA is therefore concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for UK construction projects.
The CMA said today [26 August] that Breedon and Cemex must now address its concerns within five working days. If the companies are unable to do so, the merger will be referred for an in-depth phase two investigation.
Colin Raftery, senior director at the CMA, 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.”
