Antitrust Lawyer Blog Commentary on Current Developments

Brazil Antitrust Agency Slap Record Fine on Cement & Concrete Cartel

On May 29, 2014, Brazilian antitrust agency, Conselho Administrativo de Defesa Econômica (“CADE”) maintained a record fine of 3.1 billion Brazilian reais (around $1.4 billion), on top of mandatory asset divestitures, against the members of a long-running cement and concrete cartel that has allegedly inflated the price of cement and concrete products by as much as 20% over decades. In addition, several trade associations and individuals who acted as the “coordinators” of the cartel face separate criminal charges, which may entail prison sentences.

The companies involved were Votorantim Cimentos, Cimpor, InterCement, Itabira Agro Industrial, Holcim, and Itambe, which were convicted. Lafarge settled with CADE in November 20007 for 43m Brazilian reais ($19.5 million). Cimpor attempted to settle with CADE on two occasions, once on the eve of the trial against the cartelists, but failed to reach an agreement with CADE.

According to CADE, the defendants have for decades promoted consolidation, verticalization and forged cross-ownership structures combining cement and concrete assets as a means to reduce competition in both markets as well as eliminate rivals. CADE gathered the bulk of its evidence against the cartelists in a dawn raid dating back to February 2007. The oldest piece of evidence dated back to 1987, according to CADE.

In addition to the fines and mandatory divestitures of at least 20% of the cartel’s concrete and cement capacities, the defendants are also banned from forming joint ventures or merge with each other for five years. During that time, they are also banned from starting green-field ventures. They are also to unwind the existing cross-ownership structures that were key in holding together the cartel.

However, should the cartelists appeal, it may be over a decade before compliance is finally secured. Previous fines against the steel and gas cartels, dating back to 1999 and 2010, respectively, are still not paid as the defendants’ appeals wind through court.

 

Mark Ye
202-589-1834
mye@dbmlawgroup.com