UPDATE 2-Brazil fines cement firms $1.4 bln for price rigging, orders asset sales

Thu May 29, 2014 3:40am EDT

* Antitrust watchdog Cade fines 6 firms

* Firms hold three-quarters of domestic cement, concrete market

* Votorantim, SNIC, Cimpor, Holcim to appeal (Adds company comment)

By Leonardo Goy and Guillermo Parra-Bernal

BRASILIA/SAO PAULO, May 28 (Reuters) - Brazil's antitrust watchdog Cade fined six cement makers a combined 3.1 billion reais ($1.4 billion) for fixing prices for two decades and ordered the companies to dispose of many assets, in a ruling several of the firms said they would appeal against.

Votorantim Cimentos SA, Camargo Correa SA's Intercement Brasil, Itabira Agro Industrial SA and Cia de Cimentos Itambé SA, as well as Switzerland's Holcim Ltd and Cimpor Cimentos de Portugal SGPS SA agreed to set prices to force rivals from the market, councilors at Cade said at a hearing that lasted for 10 hours.

Cade did not accept the companies' claims that there was no evidence of price-rigging and ordered them to cut installed capacity in concrete services by 20 percent in large markets. The ruling also requires the companies to do away with any cross shareholdings.

The ruling, which followed an eight-year inquiry, came amid allegations of cost overruns that have dogged preparations for this year's soccer World Cup, which Brazil is hosting and which begins in mid-June.

Local cement sales have more than doubled and prices have jumped about two-thirds over the past decade following a commodities-based boom and government efforts to expand roads and other infrastructure.

The six companies named in the ruling control about three-quarters of the domestic market for cement and concrete.

"This cartel was so strong that it had clear strategic goals," councilor Márcio de Oliveira Junior said.

Wednesday's decision was slightly less harsh than councilor Alessandro Octaviani's January proposal, which called for bigger asset disposals.

Cade also imposed sanctions on Abesc, an industry group representing concrete producers; ABCP, Brazil's Portland cement group; and SNIC, which represents local cement factories.

YEARS OF LITIGATION?

Lawyers said litigation could go on for years should the companies appeal against the rulings by Cade, which had previously blocked any attempt at early settlements.

One of the lawyers involved, who asked not to be named because of the sensitivity of the case, told Reuters that the severity of the fines and the asset disposals were unheard of in similar antitrust cases around the world.

Industry leaders allege that Cade has no legal power to impose any asset sales.

Votorantim will challenge the decision "because it is unjustified, lacks legal basis and ignores market facts," it said in a statement.

SNIC also said it plans to appeal and Holcim Brazil said it would pursue "all available legal steps to defend its position."

Cimpor also said it would appeal against the ruling, under which it would have to sell 20 percent of its concrete-making assets in Brazil.

Groups in Brazil's cement industry tend to have strong market control over specific regions, increasing the potential for collusion. The number of producers shrank to about 10 in 2011 from almost two dozen in the early 1990s.

Government studies also showed evidence that takeovers and asset swaps between cement companies were made to prevent rivals from entering the lucrative industry.

Under terms of the ruling, Votorantim will have to pay 1.5 billion reais in fines, and Cimpor 297 million reais. Cade fined Intercement Brasil, Itabira and Holcim 241 million, 411 million and 508 million, respectively. Itambé will have to pay 88 million.

Votorantim is the largest producer of cement in Brazil, followed by Holcim, France's Lafarge SA and Camargo's Intercement. Holcim and Lafarge are negotiating a merger.

In early European deals, Cimpor shares traded down 2 pct in Lisbon while Holcim was untraded due to a market holiday in Switzerland.

($1 = 2.24 Brazilian reais) (Reporting by Leonardo Goy and Guillermo Parra-Bernal; Additional reporting by Alberto Alerigi Jr and Caroline Copley in Zurich.; Editing by Lisa Shumaker, Mohammad Zargham and John Stonestreet)