OFT refers construction materials merger to Competition Commission

The Office of Fair Trading (OFT) has referred the completed acquisition by Breedon Aggregates (Breedon) of certain assets of Aggregate Industries UK (Aggregate Industries) to the Competition Commission after it identified competition concerns.

The OFT found the merger raises a realistic prospect of a substantial lessening of competition in the supply of primary aggregates, asphalt and ready-mix concrete in a number of local areas in the North of Scotland.

The OFT’s investigation examined production levels, the number of competing suppliers, the proximity of suppliers’ quarries and plants to each other (an important factor for customers) and market shares within local catchment areas, as well as profit margins. After careful assessment of the evidence, the OFT found that pre-merger the parties were strong competitors with combined market shares in excess of 40-50 percent in a number of areas. Customers expressed significant concerns that the merger may result in higher prices or a worsening of service levels.

The parties submitted an offer to remedy the competition lost by the merger but it did not address all of the OFT’s concerns. Therefore, the OFT has decided to refer the merger to the Competition Commission for a more detailed investigation.

Sheldon Mills, OFT Senior Director and Decision Maker in this case says Aggregates, asphalt and ready-mix concrete are essential to a wide variety of local infrastructure projects for public and private construction work alike:

“Our investigation indicates that Breedon and Aggregate Industries were close competitors and the merger may lead to a strong market position in a number of local areas in the North of Scotland sufficient to lead to increased prices for public sector and business customers. We consider it appropriate for the Competition Commission to conduct an in-depth investigation into this completed merger.”

The Competition Commission has until 10 March 2014 to report.