The Federal Trade Commission accepted a proposed consent order on June 15, 2001 designed to remedy the anticompetitive effects of the merger of Lafarge S.A. (Lafarge) and Blue Circle Industries PLC (Blue Circle), two leading companies in the North American cement and lime markets. Through the order, which is subject to public comment and final approval, the companies would be required to divest Blue Circle's cement business serving the Great Lakes Region (including all or parts of Ohio, Michigan, Illinois, Wisconsin and New York); Blue Circle's cement business in the Syracuse, New York area; and Blue Circle's lime business in the southeast United States.
The Syracuse cement business will be divested to Glens Falls Lehigh Cement Company (Glens Falls). The other assets will be divested to a Commission-approved acquirer. The Commission has also accepted an order to hold separate and maintain assets, which requires the companies to hold assets to be divested as separate entities and maintain them as viable, competitive and ongoing operations until the divestitures are completed.
The proposed divestitures were developed in coordination with the Canadian Competition Bureau, which had required divestitures as a condition of approving the merger. "By working together, the two agencies were able to protect consumers' interests," said Michael E. Antalics, Deputy Director of the Commission's Bureau of Competition.
Lafarge, a French corporation with global operations manufacturing and selling cement and other building materials, is one of the top three cement manufacturers in the world. It also has an ownership interest in a joint venture with Carmeuse North America Group B.V. (Carmeuse) to manufacture and sell lime. Blue Circle, based in England, also manufactures and sells cement worldwide. It is one of the top five cement manufacturers in North America, and participates in a joint venture with Chemical Lime Company (Chemical) to manufacture and sell lime. On January 8, 2001, Lafarge and Blue Circle announced their intention to merge, though an agreement in which Lafarge will pay Blue Circle shareholders approximately $3.8 billion in cash for the 75 percent of Blue Circle's outstanding voting stock that Lafarge does not already own.
According to the Commission's complaint, the merger as proposed would violate Section 7 of the Clayton Act and Section 5 of the FTC Act by illegally reducing competition in the U.S. markets for cement and lime. Cement is a construction raw material that is mixed with water to form concrete. It is made by combining calcium, silicon, aluminum, iron and other raw materials. Cement manufacturers quarry, crush and grind these raw materials, burn them in kilns at high temperatures and grind the resulting pellets into a fine powder. Lime is used in many ways in the steel industry, typically to remove impurities, and in other industries. It is made by quarrying and grinding limestone and burning it in kilns at high temperatures.
The complaint defines three geographic areas for which the merger was analyzed: 1) the market for cement in the province of Ontario, Canada; all of Michigan; and the coastal markets around Lake Superior, Lake Michigan, Lake Erie and Ontario, including Green Bay and Milwaukee, Wisconsin; Chicago, Illinois; Cleveland, Ohio; and Buffalo, New York (the Great Lakes Region); 2) the market for cement in the region within a 70-mile radius of Syracuse, New York, including the metropolitan areas of Syracuse, Utica, Rome, Elmira and Binghamton (the Syracuse Regio"); and 3) the market for lime in Alabama, Georgia and Florida (the Southeast Region).
The complaint contends that the markets for cement in the Great Lakes Region and Syracuse Region, as well as the market for lime in the Southeast Region, are highly concentrated, and that the merger would substantially increase this concentration. In the Great Lakes Region, Lafarge and Blue Circle currently have a combined 47 percent share of the cement market. After the transaction, the top four firms in the region would control 91 percent of the market. In the Syracuse Region, the companies currently have a combined market share of 68 percent, and after the merger, the merged entity and another company would control all of the cement market in this region. In the Southeast Region, if the merger proceeds, the Blue Circle/Lafarge entity and the Carmeuse joint venture together with the Blue Circle/Lafarge and Chemical joint venture would control 85 percent of the lime market.
According to the complaint, the merger would likely eliminate direct competition between Lafarge and Blue Circle, would increase the likelihood of coordinated interaction among the remaining firms in the market, and would result in increased prices for cement and lime. Entry by a new competitor, the Commission contends, would be neither timely, likely nor sufficient to offset these adverse competitive effects.
Under the terms of the proposed consent order, the anticompetitive effects of the merger would be addressed through three divestitures. First, Lafarge would divest Blue Circle's cement business in the Great Lakes Region to a Commission-approved buyer within 180 days of the merger's consummation. Second, Lafarge would divest Blue Circle's cement terminal serving the Syracuse Region to Glens Falls no later than 20 days after the merger closes. Finally, Blue Circle would be required to obtain total ownership of its lime joint venture from Chemical and Lafarge would then be required to divest Blue Circle's lime business in the Southeast Region to a Commission-approved buyer within 180 days of the merger's consummation. Lafarge would be required to wait until the Blue Circle/Chemical joint venture is unwound before consummating the merger. In each case, if the companies do not complete the divestitures within the time periods specified in the order, the FTC could appoint a trustee to sell the assets.
The proposed consent order also contains an Order to Hold Separate and Maintain Assets that would require Lafarge and Blue Circle to hold Blue Circle's Great Lakes Region cement business and Southeast Region lime business separate from the rest of their operations until Lafarge has divested these assets to a Commission-approved buyer. Under the terms of the order, the companies must preserve and maintain the marketability, viability and competitiveness of each business to be divested. Compliance with these terms will be overseen by Commission-approved monitor trustees.
A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until July 18, 2001, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
The Commission vote to accept the proposed consent agreement and Order to Hold Separate and Maintain Assets was 5-0.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed consent agreement, and an analysis of the proposed consent order to aid public comment, are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 1-877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Bureau of Competition
(FTC File No. 001-0112)