The Serbian Commission for Protection of Competition has published a non-confidential version of its decision to initiate a Phase II investigation of the planned takeover of the French multinationalLafarge by Holcim of Switzerland. Both undertakings have production facilities in Serbia and their business activities overlap with respect to cement, concrete, and, to an extent, aggregates (crushed stone, sand and gravel). In order to alleviate competition concerns arising out of the planned transaction,the applicant Holcim already in the initial concentration filing offered to the Commission to undertake certain structural measures.

Relevant markets

Cement

There are three cement factories in Serbia: one is operated by Holcim in the town of Popovac, another is Lafarge’s cement factory in the town of Beočin, while the only facility in Serbia that will not be controlled by Holcim/Lafarge post-merger is Titan’s factory in the town of Kosjerić.

For the assessment of the concentration’s effects on the Serbian cement market,Holcim proposed that the Commission define the relevant product market as the production and sale of grey cement. According to Holcim, the relevant product market should not include white cement since this type of cement is neither produced nor sold in Serbia. Further, the applicant submitted that it is not necessary to further segment the market of grey cement into sub-categories based on its class or the manner of sale (in bulk or in sacks). As for the geographic dimension, Holcimsuggested that the relevant market be defined as national. The Commission preliminarily found the proposed relevant market definition acceptable, subject to the results of the investigation.

The concentration participants cover a substantial part of the Serbian cement market – Holcim’s share is between 30% and 40% and Lafarge’s is between 40% and 50%, while their combined market share amounts to between 70% and 80%. The rest of the market is covered by Titan and cement from imports. The Commission indicated it will during the investigation pay particular attention to the regime and feasibility of cement imports into Serbia, as such imports could provide potential competition and a check on the concentration participants’ market power.

Holcim offered in the initial concentration filing an outline of the structural measures it is prepared to implement in order to obtain the Commission’s clearance (the published version of the Commission’s decision does not provide further details on the offered undertakings). Thus far, the applicants in contentious concentrations would have usually offered undertakings only once the authority issued its statement of objections. The Commission welcomed Holcim’s forthcoming approach.

Concrete

Production and sale of concrete is another market where there is an overlap between the concentration participants. Due to special features of concrete as a product (it must generally be used within 90 minutes of preparation), the applicant suggested that the relevant geographic market with respect to this product be defined as regional or local, rather than national. The Commission preliminarily concurred and indicated it will focus its investigation on local markets where there is an overlap between the concentration participants. As an example of an area where there may be certain competition concerns with respect to production and sale of concrete, the Commission pointed to the territory of Belgrade – in the capital, Holcim’s market share is between 5% and 10%, Lafarge’s between 20% and 30%, the combined market share being between 20% and 30%.

Aggregates

Unlike HolcimLafarge has no aggregates production in Serbia and its aggregates sales in the previous year were negligible. Based on this, Holcim suggested that the relevant product market be defined as the production of aggregates, without the need for further segmentation of the relevant product market, neither based on the type of aggregates nor based on their origin (whether they represent primary, secondary, or recycled aggregates). Due to high transportation costs, the applicant suggested that the relevant geographic market for aggregates be defined as local. The Commission preliminarily agreed with Holcim’s market definition, noting the concentration on this particular relevant market will not be deemed problematic. Accordingly, the focus of the authority during the investigation will be on cement and concrete.