$18.6 million penalties ordered against Cement Australia companies for anti-competitive flyash agreements

29 April 2016

The Federal Court has ordered penalties totalling $18.6 million against Cement Australia Pty Ltd and related companies, for numerous contraventions of section 45 of the Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) (the Act), which prohibits corporations from entering into, and giving effect to, contracts and arrangements that have the purpose or effect of substantially lessening competition, in proceedings brought  by the Australian Competition and Consumer Commission.

At this stage the penalty judgment has been made available to the parties only on a restricted basis, pending resolution of confidentiality issues. Accordingly, the ACCC cannot discuss the details of the penalty decision at this time.

“It is extremely important for the ACCC to take action whenever the competitive process is damaged by any behaviour that substantially lessens competition. The operation of our market economy depends upon competition to drive innovation and benefit consumers,” ACCC Chairman Rod Sims said.

“It has been a very long road for the ACCC, and the penalty judgment is an important milestone in the proceedings,” Mr Sims said.

The ACCC first brought the proceedings in 2008 against five related corporate respondents; Cement Australia Pty Ltd (currently 50% owned by Holcim and 50% owned by the Heidelberg Cement’s subsidiary Hanson), Cement Australia Holdings Pty Ltd, Cement Australia Queensland Pty Ltd (formerly Queensland Cement Ltd), Pozzolanic Enterprises Pty Ltd and Pozzolanic Industries Pty Ltd.

The proceedings relate to contracts that were entered into by Cement Australia between 2002 and 2006 with the operators of the Millmerran, Tarong, Tarong North, and Swanbank power stations in South East Queensland to acquire flyash (no allegations were made by the ACCC against the power stations). Flyash is a by-product of burning black coal at power stations, and can be used as a cheap partial substitute for cement in ready-mix concrete.

Following a lengthy fully contested hearing, the Court found numerous contraventions of s45 of the Act by all companies but Cement Australia Holdings Pty Ltd.  The extent of the findings in this matter demonstrate the significance of this competition case.

Justice Greenwood found that the conduct had the purpose and effect of preventing a competitor from entering the market by preventing them from obtaining direct access to a source of flyash in South East Queensland. As a result, Justice Greenwood found that the contracts had both the purpose and effect of substantially lessening competition.  In reaching this conclusion, Justice Greenwood observed that Pozzolanic Enterprises Pty Ltd and Cement Australia Pty Ltd enjoyed such a substantial market share, and exercised such a substantial degree of influence upon pricing in the South East Queensland concrete grade flyash market, that the competitive effect of new entry by a competitor would have been significant.

The ACCC had also alleged that this conduct amounted to a misuse of market power but Justice Greenwood dismissed this claim, because he found that the ACCC had not established that the Cement Australia companies were taking advantage of their substantial market power.

The ACCC also brought proceedings against two individuals. The case against one individual was dismissed, but declarations made against Mr Christopher White (a manager in the Cement Australia flyash business during the relevant period) for his involvement in making the contravening contracts with the operator of the Swanbank power station in 2005.  A penalty of $20 000 was ordered against Mr White for his role in the conduct.

The Federal Court made declarations in the ACCC v Cement Australia Pty Ltd & Ors matter in March 2014. See also: Federal Court declares anticompetitive conduct by Cement Australia

Release number: 
MR 67/16
ACCC Infocentre: 

Use this form to make a general enquiry.

Media enquiries: 
Media team - 1300 138 917

Tags

Audience