Exclusive – How Holcim and other Indian cement companies fix prices – Antitrust report

The investigation by the Competition Commission of India (CCI) has held the top managing directors or managing directors of Holcim units ACC and Ambuja, market leader UltraTech and 17 other companies such as Shree Cement and Dalmia Cement liable for antitrust violations.

The investigative report, released last month and seen by Reuters, is the penultimate but most important phase of the CCI investigation that began in 2019. The report, which has not been made public, will now be seen by CCI’s top three officials, who is empowered to impose fines and will give companies a last chance to defend themselves.

The cement giants could potentially be fined millions of dollars. Together, the 20 companies control more than three-quarters of the more than 500 million tons of installed cement capacity in India, the world’s second largest producer after China.

According to the report, executives of the companies discussed coordinated price increases in Zoom calls and face-to-face meetings at company pensions, with some officials using personal email to communicate with rivals. WhatsApp messages were also widely used.

A WhatsApp message from a company official, cited in the report, said a “forum” of companies had agreed to gradually increase cement prices by 5-10 rupees (6-12 US cents) in some regions. Senior managers, including from Holcim’s ACC and UltraTech, were appointed as “coordinators” for several states.

“The price will increase by the same amount every week,” the notice said.

The announcement did not provide details, but cement is usually sold to retailers in 50 kg (110 lb) bags and the price is between 350-450 rupees ($4-$6) per bag. bag, depending on the location and quality of the material. cement.

CCI did not respond to a request for comment.

Holcim said in a statement that “Indian companies are handling this matter in a responsible manner and we expect them to continue to do so accordingly.”

ACC, Ambuja and UltraTech Cement declined to comment, while Shree Cement and Dalmia Cement did not respond.

India’s Adani Group, which signed a proposed $10.5 billion deal with Holcim in May to take over its Indian operations, also did not respond.

SYSTEMATIC “CARTEL FORMATION

Cement production is a lucrative business in the booming Indian economy, with high demand, especially from rural housing and infrastructure companies.

An official from the Pavers and Blocks Manufacturers Association, whose members sell concrete paving blocks, told Reuters that price increases had been coordinated by cement companies in recent years, leaving no room to cut costs by switching suppliers.

“We sometimes pass on the higher costs to consumers,” said the official, who declined to be named because he deals with the cement companies for 50,000 bags a month and was concerned about retaliation.

Overall, the CCI investigation report concluded that the cement companies in 13 states in eastern and southern India colluded, involving more than 50 industry leaders in an “extremely organized manner” in “cartel formation”.

According to the CCI report, the Cement Manufacturers Association, a trade association, “facilitated and penetrated” anti-competitive behavior in the cartel by collecting and sharing price data among the companies. The group did not respond to questions from Reuters.

Cement companies have been accused of price fixing for over a decade. In 2016, the CCI fined 10 companies, including the Holcim parts and UltraTech, $800 million for price fixing, but the decision has since been challenged in the Supreme Court.

In the 2016 judgement, the CCI had said the producers’ association was helping the companies to cooperate and directed it to “disassociate itself from and distance itself from collecting” prices or production-related details.

Although cement prices in India diverge, the CCI report found that they were moving in the same direction.

For example, cement bag prices in Kolkata and Patna in eastern India fell for several months until January 2021 to reach 300 rupees and 350 rupees respectively. They then rose simultaneously to rupees 360 in Kolkata and rupees 390 in Patna over four months before falling again, the CCI said.

SYSTEM WITH “FURNACE CLOSURE

In southern India, UltraTech and many other smaller companies controlled cement production and supplies through informal “kiln shutdown” agreements on a mutually agreed schedule, the report said.

The aim, according to the CCI, was to coordinate production, limit cement supplies and raise prices.

A monitoring system was set up to ensure compliance with the informal settlement, the report said. The investigators found a sheet with the names of the companies and their factory locations, and appointed a rival company to visit and verify the shutdown, the report said.

The paper stated that the team from the visiting “host” company should be provided with a four-wheel vehicle and a driver on sight, which should take place at least twice a week.

The “host company” — the company being inspected — must “give all guests personal access to all furnace platforms,” ​​the magazine said.

“The evidence corroborates the fact that the cartel has developed an elaborate mechanism to verify and report turning/closing of ‘furnace’…as agreed,” the CCI report said.

CLEAR PROOF

According to the CCI report, cement bosses decided on price hike plans down to the district level in each state, dividing the companies into categories like “Group A” for large companies and recommending lower prices for “Group B” smaller industry peers.

The report included a price chart allegedly shared in January 2020 by Shailesh Ambastha, a sales and marketing director for Holcim unit ACC. It contained a detailed breakdown of the current and target “Group B” prices for 42 districts in the eastern state of Bihar.

The report says that “charts showing agreed rates per state were distributed by Ambastha to competitors and meetings were held to guide officials through implementation.

CCI said Ambastha wrote in a post, “Try to get 10 plus from your current level. This is what everyone is trying”.

In another post he wrote: “Why are you delivering on the non-trade segment at 220 when everyone is delivering at 230”.

The CCI report, which was presented with evidence, said Ambastha “gave evasive answers” saying he did not remember the statement. Ambastha did not respond to requests for comment from Reuters.

Some executives, such as Anil Kaushik, a joint vice president of marketing at Shree Cement, “knew,” the report said, who admitted under questioning to sharing pricing data with a rival for “mutual benefit.” Kaushik declined to comment to Reuters.

But the report said he told researchers: “In the cement industry, no single company can raise prices in isolation and survive.”

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