By Guillermo Parra-Bernal and Alberto Alerigi
SAO PAULO Jan 23 A push by Brazil's antitrust
watchdog Cade to impose unprecedented sanctions against six
cement makers accused of colluding to exclude rivals from the
market will likely end up in a years-long court battle, lawyers
and analysts said.
The watchdog, long seen as an industry pushover, is
reversing that image with a tough stance on what it calls "the
cement cartel." Cade board member Alessandro Octaviani proposed
on Wednesday to fine the firms a combined 3.1 billion reais
($1.3 billion) and force them to shed assets, in what may be a
landmark decision if a majority of the watchdog's board agrees.
Switzerland's Holcim Ltd, Cimpor Cimentos de
Portugal SGPS SA as well as Brazil's Votorantim
Cimentos SA, Camargo Correa SA, Itabira Agro
Industrial SA and Cia de Cimentos Itambé SA agreed to fix
prices, he said.
The companies, which together dominate almost 90 percent of
Brazil's cement and concrete market, will fight back. A lawyer
in the case said courts could considerably ease the sanctions -
a reason why Octaviani was aiming high with the fine and asset
"It's a decision previously unseen in several aspects: the
value of the fines and (the condition) that assets be sold. This
is unheard of, that you order asset sales in a cartel decision,"
a second lawyer directly involved with the case said.
The proposal, which followed an eight-year inquiry, comes as
allegations that cost overruns, partly triggered by a 66 percent
rise in cement prices in the past decade, hampered projects
across the country. Octaviani claims that customers overpaid by
around 28 billion reais over two decades because of the cartel.
Cement sales more than doubled during the period in the wake
of a commodities-based boom and government efforts to trim a
housing deficit and expand the country's roads, ports and other
Although a fellow Cade member asked for a recess to better
study the case, Octaviani's proposal is unlikely to be reversed.
Apart from Octaviani, two of Cade's five board members already
endorsed his proposal.
"If a court battle begins, this could take years," the first
lawyer said. While there is no exact date for when the hearing
could resume, Cade blocked any attempt for an early settlement
with the firms.
Pedro Galdi, an analyst with SLW Corretora, said that
companies will do the utmost to keep their assets. "I don't see
them putting their assets on the block for peanuts," he said.
Holcim said in a statement that "it acts accordingly with
the law and practices free competition in each and every market
where it is present." Votorantim, Camargo Correa, Itabira,
Itambé and Cimpor, which is controlled by Camargo Correa, did
not immediately respond to requests for comment.
'PLENTY OF EVIDENCE'
The structure of Brazil's cement industry is uneven, with
groups having strong market control over specific regions, which
magnifies the potential for collusion. The number of producers
has shrunk dramatically from almost two dozen in the early 1990s
to about 10 by the start of this decade.
Prior studies by a justice ministry antitrust body showed
that industry takeovers and asset swaps between cement producers
were made to prevent rivals from entering the lucrative
In 2010, Votorantim and Camargo Correa thwarted steelmaker
Cia Siderúrgica Nacional SA's bid for full control of
Cimpor - a move that could have made the latter one of the top
four producers in Brazil. Votorantim is the largest producer of
cement in Brazil, followed by Camargo Correa.
In what was seen as the most severe aspect of his proposal,
Octaviani urged Cade to order the companies to trim their
installed capacity by between 22 percent and 35 percent.
"There is plenty of evidence that the cement and concrete
cartel subjugated the Brazilian economy for decades," Octaviani
told fellow Cade members at a hearing, which lasted for over 10
If Cade endorses Octaviani's proposal, Votorantim would have
to pay a fine of 1.5 billion reais and dispose of 35 percent of
its factory capacity.
Intercement Brasil, Camargo Correa's cement unit and which
also owns Cimpor, would pay a 438 million reais fine and shed 25
percent of capacity. For Holcim and Itabira, a ruling would
force each of them to shed 22 percent of their capacity.
Octaviani wants to fine Holcim a total of 508 million reais.
Itambé would have to pay 88 million reais but would not have to
"The severity of the proposal make you wonder whether Cade
has all the legal elements to restore equilibrium in the
industry - to me this only opens room for a lengthy legal
battle," a lawyer with no involvement in the case said.
The lawyers quoted in this story spoke on condition of
In the prospectus for its planned initial public offering,
Votorantim Cimentos listed the Cade probe as one of the risks
hovering over the company. Votorantim scrapped the IPO last June
as markets conditions soured ahead of the deal's pricing.