Cement Trust Compensation

Since June 2011 and throughout January 2016, many companies that acquired concrete lots have suffered damage resulting from the increase in the prices of the goods.

Think of all the industries that reuse cement for the creation of construction sites and that buy tons and tons of materials on average per year.

The largest Italian based cement industries, many of them multinationals, have established an agreement aimed at increasing cement prices and controlling market shares, resulting in the harm of the normal competitive dynamics in the cement market.

The companies that bought the cement were unaware of that agree to increase the price of the cement lists and that industries sent them to the general customers, the communications relating to the future application of identical increases.

Moreover, they also agreed to monitor the effective implementation of this business practice and the effective stability of its market shares, helping themselves with a systematic exchange of sensitive information obtained through their trade association meetings.

This had obvious negative repercussions on consumers but above all on the purchasing companies, which were charged a surcharge of EUR 9 per ton, until a concrete company lodged a complaint with the Authority showing that on 15 June there had been an increase in the price lists simultaneously throughout the national territory.

Proof of the understanding between cement producers

The extensive scope of the affair has attracted the attention of many people who have had commercial relations with cement plants.

On average, direct purchasers of cement works, i.e. those who make extensive use of this material, such as large construction or road construction sites, suffered damage equal to 20% of the price paid, as was the increase charged by anticompetitive firms.

For those who buy several tons of cement, the damage can be substantial and therefore the legal protection is divided into two different solutions.

First, it is assumed that the European legislation on infringement of anticompetitive practices establishes the possibility of automatic recognition of unlawful cartels in civil compensation proceedings, reeling the applicant from the burden of proving that there has been a breach of competitive practices.

Secondly, that circumstance of favour can be relied on either in an ordinary judgment before the civil court, brought individually by the company claimed to have suffered an economic loss in the purchase of cement from one or more of the sanctioned cement works, or in one of the many class actions brought by consumer associations.

Aimed not only at final consumers who in this way amortize the costs of legal defence against generally very low compensation, the class actions brought by accredited trade associations and specialized law firms are also available to those who have suffered more substantial damage, provided that evidence of economic loss is attached.

Often, however, applications for refreshments received through the collective action instrument are infringed in the preliminary phase of eligibility because they require specific form and procedural requirements that most often discourage taking the initiative.

Fortunately, the legislator has allowed through the 2019 reform on the Code of Civil Procedure, to be able to take over the list of applicants even after the preliminary authorization of the application, expanding the usability of an instrument so far undervalued.

Antitrust has paved the way for class actions

The resonance given to the possibility of acting collectively against cement plants, is given by the fact that the Antitrust in 2017 issued a sentencing order imposing high fees against the cement plants under investigation, going so far as to impose a total of 184 million euros in penalties.

The decision was taken after considering that the anticompetitive agreement existed according to the arguments confirmed at first instance by the Tar Lazio and in the second and last instance by the Council of State.

Simultaneous price increases and concerted market control betray illicit cartel

From a substantive point of view, both the Antitrust Authority and the judicial authorities to which the cement works approached to challenge the administrative decision put forward the same arguments in support of the finding of an unlawful agreement.

The concerted increase in prices, the simultaneous delivery of communications to customers, the monitoring of the effective application of increased price lists, the monitoring of the stability of harmful effects on the market, are the salient elements of the anticompetitive conduct of cement plants.

In support of this conduct, the authorities have identified an additional external actor but not foreign to the cement works.

This is the trade association which for years has cooperated in verifying the adoption and application of the generalized price increases decided by the acceding undertakings.

According to the antitrust reconstruction, it was actively working to disseminate periodic statistical calculations relating to cement market shares, both relying on ministerial source data and carrying out autonomous surveys, in order to allow cement plants to constantly monitor market shares andverifycompliance with price consultation by all parties to the agreement.

In the administrative decisions, it is stated that the Association made its headquarters available to cement plants to organize meetings of the representatives during which the modalities of understanding were discussed.

This arrangement was of a continuity nature and was unique and complex. During the period under review, the economic situation of the cement market was critical, but cement plants managed to stem the downward trend in prices and maintain a high stability of each other's market shares.

The Authority also found that the parallelism also consisted in the massive sending of communications to customers in which news was given of the amount and subsequent effect of the price increase, and that the defensive argument that it was an imitative strategy by the various competitors and autonomous decisions to increase prices could not be accepted.

The overall conduct outlined, according to the Antitrust Authority, constitutes an agreement restrictive of competition prohibited by Article 101 of the Treaty on the Functioning of the European Union – TFEI.

In the margins of the judgment, the Competition Authority ordered the industries to refrain in the future from implementing similar conduct by imposing on them the financial penalties provided for such infringements.

The measure, in its last instance, was reviewed by the Council of State which confirmed the antitrust arguments, considering that the economically implausible behavior existed.