The Competition and Markets Authority (CMA) will require Breedon Aggregates Limited (Breedon) to sell an asphalt plant in the Aberdeen area and a ready-mix concrete (RMX) plant in the Peterhead area. It will also face a price control for asphalt produced in the Inverness area.
These measures to preserve competition and protect customer interests follow an inquiry into Breedon’s acquisition of a package of assets from Aggregate Industries UK Limited (Aggregate Industries). The CMA, which has taken over the case from the Competition Commission (CC – see ‘Notes to editors’), has found in its final report that this acquisition would lead to a reduction of competition in three areas of north-east Scotland. This confirms the CC’s provisional findings, which were published in February.
Breedon completed the acquisition in April 2013, which included 11 aggregate quarries, 4 asphalt plants, 9 RMX plants and 2 concrete block factories, located at 18 sites in north Scotland. Prior to the acquisition Breedon was the largest supplier of these products in north-east Scotland.
In its final report published today, the CMA states that Breedon and Aggregate Industries were previously competitors for many of these products across north-east Scotland and that asphalt customers in Aberdeen and Inverness, as well as RMX customers in Peterhead, could face higher prices due to the loss of competition and lack of alternative suppliers.
To address these concerns, the CMA will now require Breedon to sell either the Tom’s Forest or Craigenlow asphalt plant and one of the Peterhead or Stirlinghill RMX plants to a competitor approved by the CMA – along with the staff needed to operate the plants and associated contracts and supply agreements. Because the competition concerns in relation to the asphalt market in Inverness are expected to be short term, asphalt supplied by the company will be subject to a price control in that area until 2018 at the latest.
Aggregates, asphalt and RMX are used in construction as well as road building and maintenance. During its investigation, the CC held hearings with a number of customers and interested parties including Aberdeen City Council and Transport Scotland.
Simon Polito, Chair of the Inquiry Group and CMA Deputy Chair, said:
Both these products are vital for construction projects and road building, much of which is funded by the public purse. It is therefore important to ensure customer interests are protected, which we are doing through the plant sales and price control.
The markets for these products are local so the loss of a competitor in even a relatively small area matters – particularly when the cost and proximity of the production site are the most important factors for customers and in a market where most prices are negotiated.
Notes for editors
- The CMA is an independent public body, which carries out investigations into mergers, markets and the regulated industries and enforces consumer and competition law. On 1 April, the CC joined with the competition and certain consumer functions of the Office of Fair Trading (OFT) to form the new Competition and Markets Authority.
- The members of the Inquiry Group are: Simon Polito (Chair of the Group), Robin Aaronson, Lesley Ainsworth and Graham Sharp.
- The Enterprise Act 2002 empowered the OFT to refer to the CC completed or anticipated mergers for investigation and report which create or enhance a 25% share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.
- The inquiry was referred to the CC on 24 September 2013 and the CC had a 24-week period in which it was required to publish its report, which might be extended by no more than eight weeks if it considered that there were special reasons why the report could not be published within that period. On 4 February 2014, the CC extended the reference period by eight weeks to 5 May 2014 due to the late provision of new market data that delayed the publication of its provisional findings.
- Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 3738 8798 or 020 3738 6460.