Fair Trade Commission monitoring TCL monopoly in cement market

The Trinidad and Tobago Fair Trade Commission (TTFTC) is actively monitoring Trinidad Cement Ltd (TCL) to ensure that it is not abusing its monopoly power in the cement market.

TCL's announcement of an eight-15 per cent hike in its cement prices, effective next Monday, has raised concerns in the construction sector and among homeowners who want to conduct home renovations or small projects.

TTFTC executive director Bevan Narinesingh told Business Day it will continue to review the market over time to determine if the reasons TCL put forward for the increased prices are justified.

“We cannot do anything about TCL having a monopoly or dominant position in the market. The issue would be if the pricing is relative to an appropriate benchmark in way that that pricing is fair," he said on Wednesday.

"We will have to determine if the price rise is justifiable based on the circumstances they have before them. If the prices increased because of factors they could explain, even though it is a monopoly, would not constitute an abuse of dominant position.”

This week, TCL announced the price of Premium Plus cement will increase by 15 per cent and Eco-cement by eight per cent due to increases in input costs.

TCL manager Reshma Gooljar-Singh, in a letter to stakeholders, said the company can no longer maintain its prices because of the price hikes in natural gas, imported spares and raw materials used to manufacture quality cement.

In a price list sent out to customers, TCL said a 42.5 kg bag of Premium Plus and Eco-cement will increase respectively from $41.39 to $46.56, and from $38.85 to $43.71 VAT-inclusive.

TCL’s cement is also distributed in several countries in the region — St Lucia, Grenada, Guyana, Montserrat, St Kitts, St Vincent, and Suriname. Construction stakeholders have raised concerns of an abuse of pricing power by the company.

Narinesingh emphasised that the TTFTC will have to determine if the pricing structure implemented by TCL was justifiable by market conditions, if the measures implemented were the right ones to ensure market competition, and to monitor business/hardware agreements with TCL to ensure that there was not an abuse of power.

He added that the contracts that TCL engages in with distributors and retailers such as hardwares must allow for competition and for other brands to be sold.

“Even though a company is a monopoly, it cannot be acting in such a way to stifle competition. For instance, if you have an agreement that says you are tied to only exclusively buying TCL products as opposed to imported cement for an exorbitant time, we must ensure those agreements do not exist in the market right now.

“So, if indeed, importers/competitors are allowed to bring in larger amounts of cement at cheaper prices, there should be enough wiggle room for businesses/hardwares to decide to purchase from them.”

Narinesingh said since TCL signalled its intention to increase prices, the Government has put mechanisms in place for cheaper importation of cement and opened the market for clean and fair competition.

“The Government has indicated that the common external tariff would be lowered with respect to cement. This could mean that there could be potentially more competitors in the market and competition for imports. The present quota for imports was also larger, so now there can be a greater amount of cement that can be imported into TT.

“To determine if this can be effective will take some time to conduct proper examinations investigations with respect to the data, and to see if this move by the Government has led to greater import of cement and as result produced effective competition.”

The Ministry of Trade and Industry, in a statement Monday, said when it became aware of impending cement price increases in November, Cabinet agreed to a revision of the quota and import licensing regime for cement for 2022.

The quota for imported cement would increase from 75,000 tonnes to 150,000 in 2022 and the Council for Trade and Economic Development also agreed, at the request of TT, to suspend the common external tariff and decrease the duty from 50 per cent to 20 per cent on other hydraulic cements for one year, starting January.

Previously the lower quota and higher duties, implemented by Government in early 2021, eventually forced a local cement distributor out of the market. Rock Hard Distributors Ltd had attempted to challenge the Government’s 75,000 tonnes quota and 50 per cent import duties but lost that judicial review. It has since closed operations in TT.

Rock Hard imported cement from Turkey and operates in several other Caribbean islands.

Ryan Ramhit, the managing director of Rock Hard’s local distributor Motilal Rahmit and Sons, on Tuesday said the company felt it had been "mistreated and victimised" by the Government.

“Basically, we are out of the market. The Government made it clear that they were in support of the local manufacturer. Of course, I would have my opinion and that could be biased."

Ramhit said Rock Hard would re-enter the market once there was free and open trade.

Narinesingh explained that the TTFTC monitored entities, especially those with high market shares to ensure the market power was not abused. He said monitoring individual hardwares was not under their purview but rather falls to the Consumer Affairs Division. He pointed out however, if there was a group of hardwares in close proximity engaging in unfair pricing, the TTFTC would be required to investigate.

“An issue that has come to our attention is if the hardwares would be doing a mark-up on the price increase and how that affects the end consumer. Our issue is whether the hardwares as a group would be doing that. We don’t investigate individual hardwares, it will have to be a group.

“We always encourage customers, retailers, hardwares to come to us to with their concerns. We will also reach out at some point in this process to indicate to them and remind them of Act and their obligations.”

Abuse of monopoly power and redress under the Fair Trading Act 2006 is addressed in Part II, section 20-25.

Section 21 (1) stated, “An enterprise which has monopoly power, abuses that power if it impedes the maintenance or development of effective competition in a particular market.”

If the TTFTC is satisfied that a company has abused its monopoly power, an order for cessation of monopoly practice is issued. Failure to comply can result in the matter may be referred to the High Court.