Divestitures Preserve Competition in Five Regional Cement Markets Around the Country
German cement producer HeidelbergCement AG and Italian producer Italcementi S.p.A. have agreed to divest a cement plant in Martinsburg, WV and up to 11 cement distribution terminals in six other states to settle Federal Trade Commission charges that their proposed $4.2 billion merger would likely harm competition in five regional markets for cement in the United States.
Heidelberg and Italcementi are the second and fourth largest producers of cement in the world, according to the FTC. In the United States, the two companies compete through their respective U.S. subsidiaries, Lehigh Hanson and Essroc Cement Corp., to sell portland cement – an essential ingredient in making concrete.
According to the FTC complaint, the merger as proposed would harm competition for portland cement in five metropolitan areas: Baltimore-Washington, DC; Richmond, Virginia; Virginia Beach-Norfolk-Newport News, Virginia; Syracuse, New York; and Indianapolis, Indiana. In each of these markets, the FTC alleges the merger as originally proposed would have reduced the number of competitively significant suppliers from three to two.
The complaint also alleges that, without a remedy, the merged firm would be more likely to unilaterally raise prices in these markets and that it would be easier for the remaining firms to coordinate successfully to raise prices. As a result, cement customers in these markets would likely face higher prices.
The proposed consent agreement requires the merged company to divest to an FTC-approved buyer an Essroc cement plant and quarry in Martinsburg, West Virginia; seven Essroc terminals in Maryland, Virginia and Pennsylvania; and a Lehigh terminal in Solvay, New York. At the buyer’s option, the order also requires the merged company to divest two additional Essroc terminals in Ohio. Under the proposed order, these divestitures must occur within 120 days after the merger is complete.
In addition, the merged company has ten days after the merger is complete to divest Essroc’s terminal in Indianapolis to Cemex, Inc. Further details about the consent agreement – which includes an asset maintenance order and allows the Commission to appoint a monitor – are set forth in the analysis to aid public comment for this matter.
The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 20, 2016, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $16,000 per day.
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