Cement in industry - Bundeskartellamt highlights issues of joint venture participations and price signalling

​On 24 July 2017, the Bundeskartellamt published its final report on the sector inquiry in the ready-mix concrete industry and highlighted its stance regarding minority shareholdings in joint venture companies and potential enforcement activity regarding price signalling.

The sector inquiry focussed on the structural conditions in the cement and ready-mix concrete industry. The results published indicate that these involve concentrated (local) markets with few suppliers, diverse links between the suppliers and a high degree of market transparency. Also the products in questions are homogeneous bulk goods with few innovation steps. Therefore structural conditions in the industry lead to a dampening effect on competition and encourage parallel conduct with little competition. Hence the Bundeskartellamt announced that it will continue to focus closely on this sector and will, for example, examine interlocks that raise competition law concerns and, where necessary, break them up.

One particular focus of the report is interlocks between competitors and in particular the holding of interests in joint venture companies. The Bundeskartellamt raised issues regarding joint ventures already in the past in the asphalt sector where it found that joint venture participation was used to either exchange commercially sensitive information or to enable collusion between competitors. The same issues have been raised again which led the Bundeskartellamt to order structural measures either in the form of divestures or other structural means. Critical joint venture structures are in particular those where two of the parents are active in the same (regional) market as the joint venture or remain active in such market. Other problematic cases depend on geographic relationship of the parties and issues may arise where only one of the joint venture partners is active in the same market as the joint venture or the joint venture partners are competitors in other geographic markets as the joint venture spill-over effects could arise.

Another point of concern is price communication. The Bundeskartellamt became aware of the practice that one big supplier of cement sent out letters to all customers informing them of price increases which was followed up by other big suppliers with similar increases. For the Bundeskartellamt, these practices can be problematic if these letters are found to be an invitation or signal to competitors to also increase their prices. The Bundeskartellamt refers to cases by the UK Competition and Markets Authority which intervened also in the cement sector in 2016 and EU Commission which intervened in regard of the publication of tariffs of container liner shipping companies in July 2016. The statements of the Bundeskartellamt suggest that the German authority will also conduct further investigations regarding price signalling and may take further intervention steps.

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