The Federal Trade Commission is seeking to block Lehigh Cement Company LLC’s $151 million acquisition of rival Pennsylvania-based cement producer Keystone Cement Company, alleging the deal would harm regional competition in the market for the key ingredient used to make concrete. Lehigh owns and operates multiple facilities that sell cement in direct competition with Keystone, including two cement plants located within 40 miles of Keystone’s plant in Bath, Pennsylvania.
The Commission filed an administrative complaint and authorized a suit in federal court, to enjoin the transaction pending the outcome of the administrative proceedings. Lehigh is a subsidiary of HeidelbergCement AG; Keystone is a subsidiary of Elementia S.A.B. de C.V.
Cement is an essential ingredient of concrete, a fundamental and ubiquitous construction material. Cement has no reasonable substitute, and because cement products are heavy and relatively cheap, transportation costs limit markets to local or regional areas, the complaint states.
The FTC alleges that the acquisition would harm competition in the market for gray portland cement in eastern Pennsylvania and western New Jersey, reducing the number of significant competitors from four to three. Lehigh is by far the leading cement supplier in this market, and as a result of the acquisition, the combined firm would control more than 50 percent of cement sales, with two other competitors accounting for most of the other sales. Moreover, Lehigh and Keystone are close competitors for many cement customers in eastern Pennsylvania and western New Jersey. Keystone’s aggressive pricing has caused Lehigh to lower its cement prices in that market, and to compete on price more vigorously, the complaint states. The acquisition would significantly reduce competition for cement customers, according to the complaint, as the combined firm would be able to unilaterally raise prices or reduce output and quality.
By removing Keystone as a competitor, the acquisition would also make anticompetitive coordination among the remaining cement suppliers more likely, according to the complaint. The cement industry has a number of characteristics that make it especially vulnerable to coordination. The potential for anticompetitive coordination is heightened by the fact that cement suppliers, including the same global firms that compete in the relevant market, have expressly colluded in other geographic markets with similar characteristics within the last two decades, the complaint states.
Neither new entry nor expansion by other market participants is likely to prevent the acquisition’s anticompetitive effects, according to the complaint. No new plants or terminals have been constructed in eastern Pennsylvania or western New Jersey in over 30 years. There are also significant barriers that would make new entry slow and difficult, such as substantial sunk costs, environmental and regulatory requirements, economies of scale, and industry expertise.
The complaint also names Lehigh Hanson, Inc., a subsidiary of Germany-based HeidelbergCement AG, and Giant Cement Holding, Inc., a subsidiary of Mexico-based Elementia S.A.B. de C.V.
The Commission is grateful for the Pennsylvania Office of Attorney General’s participation in this investigation. The Pennsylvania Office of Attorney General’s contributions have been invaluable in this matter, and the Commission looks forward to continued collaboration.
The Commission vote to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction was 4-0. The administrative trial is scheduled to begin on Nov. 2, 2021.
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. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.