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Clay brick joint venture 'likely to lessen competition'

16 October, 2014

A proposed joint venture between CSR Limited and Boral Limited's could create competition issues among suppliers of clay bricks, the ACCC outlined in a recent statement.

"The ACCC is seeking further information to determine whether the proposed joint venture is likely to substantially lessen competition in the supply of clay bricks," ACCC Chairman Rod Sims said.

CSR and Boral are both suppliers of a range of products including plasterboard, insulation, fibre cement, and roof tiles to the building and construction industry in Australia.

CSR and Boral propose to form a joint venture for the manufacture, marketing, and supply of clay bricks in eastern Australia.

Reduced number of suppliers

The proposed joint venture would reduce the number of major clay brick suppliers in eastern Australia from three to two, with the other being Austral Bricks.

In NSW and Queensland, these two remaining suppliers, the joint venture and Austral Bricks, would account for approximately 99 per cent of the supply of clay bricks.

"The proposed joint venture would result in a duopoly in eastern Australia. The ACCC's preliminary view is that this would be likely to lead to an increase in the price of clay bricks as well as a reduction in the product range available to residential builders, architects, and end-consumers," Sims said.

"This view is based on information provided to the ACCC in its market inquiries."

The ACCC has undertaken extensive market inquiries, and received considerable information from the joint venture parties. At one time the joint venture parties asked the ACCC to suspend its decision for three months while they prepared further submissions.

No substitute cladding material

"A critical issue for the ACCC is determining what would be likely to occur in the markets if the proposed joint venture does not proceed. At this stage, the ACCC intends to assess the likely competition effects of the proposed joint venture on the basis that CSR and Boral will remain in the markets in some form if the joint venture does not proceed, but we are seeking further information on this issue," Sims said.

"The ACCC notes the tolling arrangements the joint venture parties already have in place.

"The ACCC's review to date has found that other external cladding materials are not substitutes for clay bricks.

"Other materials such as pre-cast concrete wall panels are generally used in commercial construction and high-density residential construction, and may also be used to complement the use of clay bricks in residential construction.

"However, market inquiries have indicated that consumers generally want their new homes built primarily out of clay bricks, especially for detached homes.

"Consumers are unlikely to choose fibre cement boards, concrete blocks or other materials in response to brick prices increasing."

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Peter | Friday, October 17, 2014, 8:56 PM
To the ACCC, amalgamations and takeovers have substantially eroded competition in the Australian market place. These have been sold by the corporations under the guise of similar synergies to reduce costs, yet it is plain to all consumers that the end user is the bunny who ends up paying more. Capitalism does not work for the consumer when competition is eroded. Large corporations need to attain grow via improved efficiencies, not simply by increased monopolisation and decreased competition.