UPDATE 1-UK watchdog warns cement makers over lack of competition

Tue May 21, 2013 10:19am EDT

* Says producers may have to sell plants

* Consumer costs up by 180 mln pounds 2007-2011-Competition Commission

* Producers' prices, profits rose at time of low demand

* Companies know too much about each other, do not compete fully

By Brenda Goh and Peter Dinkloh

LONDON/FRANKFURT, May 21 (Reuters) - Britain's dominant cement makers could be forced to sell off plants to tackle a lack of competition which regulators say has cost customers hundreds of millions of pounds.

The Competition Commission (CC) said despite low demand in recent years, producers have managed to raise prices and profits.

"The established producers know too much about each other's businesses and have concentrated on retaining their respective market shares rather than competing to the full," said CC Deputy Chairman Martin Cave.

Because the market was restricted to four players - Lafarge Tarmac , Cemex, HeidelbergCement's Hanson and Hope Construction Materials - the lack of competition cost customers at least 180 million pounds ($275 million) between 2007 and 2011, the CC said on Tuesday.

Cave said the CC's findings did not mean the companies were explicitly colluding or operating a cartel.

Lafarge, which co-owns Lafarge Tarmac with Anglo American, and Cemex both said they believed effective competition existed and that they would assist the CC in its investigation.

"The suggested possible 'remedies' are wholly disproportionate," Cemex said.

The CC said it might require one or more of the top three producers to dispose of some plants or reduce their cement production capacity.

It could also create a cement buying group to give smaller customers more bargaining power or restrict the disclosure of government and industry market data which have provided the companies with a high level of understanding about each other.

The CC's criticisms come as the cement industry battles weak demand from the construction sector and follows a decade which has seen the European Union and German authorities fine firms such as Cemex and Lafarge for cartel activity.

The EU Commission has been investigating companies including Lafarge, Holcim, Cemex and HeidelbergCement in 10 countries in the European Union since 2008 for illegally setting prices, restricting imports and market sharing.

HeidelbergCement, which owns British cement maker Hanson, said it was cooperating with the CC but would not comment on the findings before the final report, due by next January.

Hope Construction had no comment.

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