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ANALYSIS OF AGREEMENT CONTAINING CONSENT ORDERS

TO AID PUBLIC COMMENT

In the Matter of Cemex, S.A. de C.V.

File No. 051 0007, Docket No. C-4131

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 readymix concrete and a leading producer of cement and aggregates in Europe. RMC has five readymix concrete plants in the Tucson, Arizona area, all of which are supplied internally with

locally-produced aggregates. 
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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, readymix 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 readymix 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
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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,
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President, Roebuck Consulting Group, as a Hold Separate Monitor to 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.