A May 8 Federal Trade Commission statement addresses a consent agreement tied to the Lafarge S.A. and Holcim Ltd. merger, and how Lafarge North America and Holcim (US) Inc. asset sales resolve an administrative complaint alleging anticompetitive effect in 12 U.S. markets and two regions.
Transfer of portland and slag cement operations to approved buyers, FTC officials note, will remedy market concentration levels exceeding those in the agency’s 2010 Horizontal Merger Guidelines. Central to that document is the Herfindahl-Hirschman Index (HHI), calculated by squaring major producers’ market shares: 30² + 30² + 20² + 20² = 2,600, for example. The “highly concentrated” market threshold is 2,500.
Absent Lafarge U.S. and Holcim (US) asset sales amid the parent companies’ merger, FTC figures, the HHI for porland cement and slag cement in the respective 12 markets and two regions “would exceed 3,400, making every market highly concentrated according to the Guidelines. The increase in HHI in each market would exceed 900, well above the 200-point change necessary to trigger presumption that the merger is ‘likely to enhance market power.’ There is no evidence rebutting this presumption. If anything, the evidence suggests that the estimates of market concentration understate [FTC] concerns.”
“In each of the relevant markets, there is evidence that unilateral anticompetitive effects are likely,” the Commission contends. “Substantial evidence demonstrates that, for many customers in the relevant areas, the merging firms are their preferred suppliers and that customers have benefitted from substantial head-to-head competition between the parties in negotiating prices for portland and slag cement. Customers in every single one of the affected markets expressed concern that their inability to play the merging parties off each other would diminish their ability to obtain better prices or other favorable terms.”
The proposed Lafarge, Holcim union triggered what was likely one of the most complex investigations of cementitious material production and distribution markets in FTC history. Agency peers north of the border were spared a comparable probe, owing to a Holcim Ltd. commitment early on that the entire Holcim (Canada) Inc. enterprise would be unloaded. The Canadian Competition Bureau focused on aspects of a Holcim (Canada) sale with strong U.S. connections—mainly the integration of a) five Michigan, Minnesota, New York and Ohio terminals with Holcim’s Mississauga, Ont., mill; and, b) two Alberta terminals and the Holcim (US) Three Forks, Mont., mill.
“This merger review demonstrates how the Bureau and its international counterparts can work together to ensure an effective remedy in each jurisdiction and strengthen competition law enforcement partnerships,” noted CCM Commissioner of Competition in a May 4 statement. “I commend the parties for the level of cooperation they provided to the Bureau throughout our review of the proposed transaction and for reaching this agreement, which will preserve competition in the supply of cement and related products throughout Canada.”
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