Cemex S.A. de C.V.; Analysis To Aid Public Comment, 11669-11672 [05-4591]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 70, Number 45 (Wednesday, March 9, 2005)]
[Notices]
[Pages 11669-11672]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-4591]


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FEDERAL TRADE COMMISSION

[File No. 051 0007]


Cemex S.A. de C.V.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before March 15, 2005.

ADDRESSES: Comments should refer to ``Cemex, S.A. de C.V., File No. 051 
0007,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room H-159, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
Supplementary Information section. The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form (except comments containing any 
confidential material) should be sent to the following e-mail box: 
consentagreement@ftc.gov.

FOR FURTHER INFORMATION CONTACT: Randall Long, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2715.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for February 14, 2005), on the World Wide Web, at ``https://
www.ftc.gov/os/2005/02/index.htm.'' A paper copy can be obtained from 
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, 
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before March 15, 2005. Comments should refer to ``Cemex, S.A. de 
C.V., File No. 051 0007,'' to facilitate the organization of comments. 
A comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If the 
comment contains any material for which confidential treatment is 
requested, it must be filed in paper (rather than electronic) form, and 
the first page of the document must be clearly labeled 
``Confidential.'' \1\ The FTC is requesting that any comment filed in 
paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
filed in electronic form should be sent to the following e-mail box: 
consentagreement@ftc.gov.
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at https://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Cemex, S.A. de C.V. (``Cemex''). The purpose of the 
Consent Agreement is to remedy the anticompetitive effects resulting 
from Cemex's proposed acquisition of RMC, PLC (``RMC''). The Consent 
Agreement requires Cemex to divest RMC's Tucson, Arizona ready-mix 
concrete business within six months of the date Cemex signed the 
Consent Agreement. The Consent Agreement also includes an Order to Hold 
Separate and Maintain Assets that requires Cemex to preserve the RMC 
Tucson, Arizona ready-mix concrete business as a viable, competitive, 
and ongoing operation until the divestiture is achieved.
    The Consent Agreement has been placed on the public record for 30 
days for receipt of comments by interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Consent Agreement and the 
comments received, and will decide whether it should withdraw from the 
proposed Consent Agreement or make it final.
    Pursuant to an Implementation Agreement dated September 27, 2004, 
Cemex agreed to acquire 100 percent of the existing shares of RMC for 
approximately $5.8 billion (``Proposed Acquisition''). The Commission's 
complaint alleges that the Proposed Acquisition, if consummated, would 
violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, by substantially lessening competition in the Tucson, Arizona 
market for the manufacture and sale of ready-mix concrete.

II. The Parties

    Headquartered in Monterrey, Mexico, Cemex is the third largest 
cement company in the world, with significant downstream businesses in 
ready-mix concrete and related products. Cemex's operations in Tucson, 
Arizona consist of four ready-mix concrete plants, all of which are 
supplied internally with concrete aggregates.
    RMC is a United Kingdom Holding Company headquartered in London, 
with nine subsidiaries doing business in the United States. RMC is the 
world's largest supplier of ready-mix concrete and a leading producer 
of cement and aggregates in Europe. RMC has five

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ready-mix concrete plants in the Tucson, Arizona area, all of which are 
supplied internally with locally-produced aggregates.

III. The Tucson, Arizona Ready-Mix Concrete Market

    The relevant product market in which to assess the competitive 
effects of the Proposed Acquisition is ready-mix concrete. Ready-mix 
concrete is produced at local plants by combining cement, aggregates, 
and water in accordance with precise specifications. Once blended, 
ready-mix concrete is delivered to construction sites as a slurry in 
trucks with revolving drums. At construction sites, ready-mix concrete 
is poured and formed into its final shape. Among building products, 
ready-mix concrete is unique because it is pliable when freshly mixed 
and strong and permanent when hardened. Due to ready-mix concrete's 
exceptional characteristics as a building material, ready-mix concrete 
customers would not switch to other materials, such as steel, wood, or 
asphalt, in the event of a five to ten percent increase in the price of 
ready-mix concrete. Indeed, for some applications, such as certain 
building foundations, concrete's unique structural characteristics make 
it the only viable construction material.
    The relevant geographic market in which to analyze the effects of 
the Proposed Acquisition is the Tucson, Arizona metropolitan area. The 
geographic scope of competition in ready-mix concrete is circumscribed 
by the perishable nature of the product. Once ready-mix concrete is 
blended at a plant and loaded into a truck, it will solidify if it is 
not poured in a timely manner (typically less than one hour), rendering 
it useless. Hence, ready-mix concrete generally is sold within a 10 to 
20 mile radius of the plant where it is mixed, although the precise 
mileage may differ depending on traffic patterns and infrastructure. 
For instance, traffic congestion within a metropolitan area can 
significantly lengthen delivery times, whereas a plant located on the 
periphery of the market may be able to serve a larger area. Due to a 
low value-to-weight ratio, transportation costs also can effectively 
limit the distance that ready-mix concrete can be shipped. There are 
three ready-mix competitors in Tucson, each operating at least four 
ready-mix concrete plants: Cemex, RMC, and Rinker. Each competitor has 
spaced plants within 20 miles of its other plants, creating a network 
capable of supplying the entire area.
    The three-firm Tucson, Arizona ready-mix concrete market is highly 
concentrated. If the Proposed Acquisition is consummated, the Tucson, 
Arizona ready-mix concrete market will become even more concentrated 
with only two independent suppliers. As a result, the Proposed 
Acquisition likely would facilitate coordinated behavior between Cemex 
and its lone remaining competitor. Coordination is particularly likely 
where the relevant product is homogenous, as is ready-mix concrete. In 
a two-firm market, each competitor would have an enhanced ability to 
monitor the other's conduct, and would know with certainty the source 
of any discounting. Likewise, the accuracy and effectiveness of any 
retaliation for deviations from the terms of collusion would greatly 
improve with only one remaining competitor. As a result, the Proposed 
Acquisition would increase the likelihood that ready-mix concrete 
purchasers in Tucson, Arizona would be forced to pay higher prices and 
would receive diminished service. Absent Commission action, Cemex's 
acquisition of RMC raises significant antitrust concerns in Tucson, 
Arizona.
    Entry into the Tucson, Arizona ready-mix concrete market on a level 
sufficient to deter or counteract the likely anticompetitive effects of 
the Proposed Transaction is not likely to occur in a timely manner. 
Entry into this market is difficult due to a limited availability of 
the vital raw materials, i.e., aggregates and cement, necessary to 
sustain a new ready-mix concrete operation. In Tucson, Arizona, ready-
mix concrete operations are closely intertwined with concrete aggregate 
operations. As a result, concrete aggregates are not currently 
available on the open market in Tucson on the scale necessary to 
sustain a new ready-mix concrete competitor. Thus, a new concrete 
entrant would need to enter the aggregate business itself, or enter the 
market contemporaneously with a new aggregate entrant. Neither 
alternative is likely to occur in a timely manner. Viable locations for 
concrete aggregates in Tucson are scarce, and even if a suitable site 
were found, an aggregates entrant would then need to undergo an 
extensive permitting process with Federal, State, and local 
authorities. Entry into the Tucson, Arizona ready-mix concrete market 
also is made difficult by the scale required to compete. Entry with a 
single ready-mix plant would be insufficient, as customers typically 
require that a supplier have a network of plants. Presently, all three 
ready-mix companies have a network of at least four plants supplying 
the entire Tucson metropolitan area. Due to these entry barriers, new 
entry by a ready-mix concrete company has not occurred in Tucson in 
over ten years.

IV. The Consent Agreement

    The Consent Agreement effectively remedies the Proposed 
Acquisition's anticompetitive effects in the Tucson, Arizona ready-mix 
concrete market by requiring Cemex to divest RMC's Tucson, Arizona 
ready-mix concrete business. Pursuant to the Consent Agreement, Cemex 
is required to divest the RMC Tucson, Arizona ready-mix concrete 
business to a buyer, at no minimum price, within six months of the date 
Cemex signed the Consent Agreement. The acquirer of the RMC Tucson 
business must receive the prior approval of the Commission. The 
Commission's goal in evaluating possible purchasers of divested assets 
is to ensure that the competitive environment that existed prior to the 
acquisition is maintained. A proposed acquirer of divested assets must 
not itself present competitive problems.
    Should Cemex fail to accomplish the divestiture within the time and 
in the manner required by the Consent Agreement, the Commission may 
appoint a trustee to divest these assets. If approved, the trustee 
would have the exclusive power and authority to accomplish the 
divestiture within six months of being appointed, subject to any 
necessary extensions by the Commission. The Consent Agreement requires 
Cemex to provide the trustee with access to information related to the 
RMC Tucson business as necessary to fulfill his or her obligations.
    The Order to Hold Separate and Maintain Assets that is included in 
the Consent Agreement requires that Cemex hold separate and maintain 
the viability of the RMC Tucson business as a competitive operation 
until the business is transferred to the Commission-approved acquirer. 
Furthermore, it contains measures designed to ensure that no material 
confidential information is exchanged between Cemex and the RMC Tucson 
business (except as otherwise provided in the Consent Agreement). The 
Order to Hold Separate and Maintain Assets is also designed to prevent 
interim harm to competition in the Tucson, Arizona ready-mix concrete 
market pending divestiture. Under the Order to Hold Separate and 
Maintain Assets, the Commission may appoint a Hold Separate Monitor to 
monitor Cemex's compliance with the Consent Agreement. Pursuant to that 
Order, the Commission has appointed Stephen J. Roebuck, President, 
Roebuck Consulting Group, as a Hold Separate Monitor to

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oversee the RMC Tucson business prior to its divestiture and to ensure 
that Cemex complies with its obligations under the Consent Agreement. 
Mr. Roebuck has more than 25 years of construction materials industry 
experience at all levels of management. Most recently, Mr. Roebuck 
served as Vice President of Sales and Marketing with Southdown, Inc.'s 
Concrete Products Division. He is also a former member of the Board and 
Executive Committee of the National Concrete Masonry Association; has 
authored over 20 industry-specific continuing education programs; and 
has served as a contributing author and editor for the National Ready 
Mixed Concrete Association's Certified Concrete Sales Professional 
program.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the Consent Agreement or proposed Order or to modify 
the terms of the Consent Agreement or proposed Order in any way.

    By direction of the Commission, Chairman Majoras recused.
Donald S. Clark,
Secretary.
[FR Doc. 05-4591 Filed 3-8-05; 8:45 am]
BILLING CODE 6750-01-P