Hardcore Cartels Within The Scope of The

Egyptian Competition Law

(The Cement Case)

Bradford University, U. K
January 2010

Rostom Omar
 The Egyptian Competition Law addresses three
types of anticompetitive practices:

1. Horizontal Agreements (Art. 6)

2. Vertical Agreements (Art. 7)

3. Abuse of Dominant Position (Art. 8)

 Elements of the violation:
1- Agreement or contract: verbal or written (Article 10 of the Ex. Reg.)

2- Between competitors: persons who have the ability to carry out the
same activity in the relevant market at the present time or in the
future (Article 9 of the Ex. Reg.)

3- In the relevant market: relevant product + geographical area

4- Exhaustive list of prohibited agreements or contracts: price

fixing – market allocation – bid rigging or collusive tendering –
limiting production or services.
 Price Fixing

• Increasing, decreasing or fixing prices of sale or

purchase of products subject matter of dealings.

• Determination of price shall cover due returns on

instalments, guarantee duration, after sale services
and other contractual conditions that influence the
purchasing or selling decision.
 Market Allocation

Dividing product markets or allocating them on grounds of:

• geographic areas,
• distribution centres,
• clients or goods base,
• market shares,
• seasons or time periods.
 Bid Rigging
• Coordination with regards to proceeding or refraining from
participating in tenders, auctions, negotiations and other calls for
procurement.

• Indications that are taken into consideration for the existence of

coordination are, in particular, the following:
o Submitting similar offers (prices or offer conditions).
o Agreeing on the person who will submit the offer.
o Agreeing on the submission of fictitious offers.
o Agreeing on preventing a person from submitting offers.
 Limiting Production

• Restricting the manufacturing, production, distribution or

marketing or limiting the distribution of services in terms
of its kind or volume or applying conditions or
restrictions for their availability.
• Standard of proof

1. Criminal case: Beyond reasonable doubt.

2. Burden of proof: ECA

3. Evidence: All types of evidence including legal and economic

analysis are accepted before courts

4. Leniency: Partial leniency program subject to the discretion of

the court (no bargain with ECA).
The Cement Case
 Facts:

• Market Players
o 9 market players
• Relevant market
o Relevant product: Ordinary Portland Cement (OPC).
o Geographic area: Egypt (No OPC imports since 2004).
• Study duration
o 2002 – 2006 (including indicative period before the entry into force of the
law in May 2005, necessary for economic and legal analysis).
• Violations:
o The market study and the data supplied by cement producing companies
indicated their violation to articles 6/A & 6/D of the law.
 Factors facilitating agreement among market players
in the Egyptian market:

1. Product homogeneity (unified specs).

2. Limited no. of market players (9 market players).
3. Transparency among competitors (monthly report, prepared
by government, including data on production, sales and
export); this report is distributed among the companies.
4. Direct communication between sales & marketing officials of
the cement companies formally & informally (witnesses).
5. Demand inelasticity
  Indicators assuring agreement between companies to
raise prices and limit marketing:

1. The agreement resulting from the cement companies meeting

with Minister of Public Enterprises in March 2003,
allocating a specific market share for each company
regarding local sales depending on the available production
capacities for each company at that time and raising prices.
Just after the meeting the average price has increased and
prices have been increasing ever since.
 Local Prices Trends
360.0
330.0
300.0
Prices

270.0
240.0
210.0
180.0
150.0
120.0
2002 2003 2004 2005 2006
Years
A B C D E F G H I
 Average Prices Vs Average Cost
350
300
250
Prices (LE)

200 average
150 cost
100 average
prices
50
0
2002 2003 2004 2005 2006
Years
  Indicators assuring agreement between companies to
raise prices and limit marketing (CONT.):
4. Local Sales & market shares
– A steady increase in local sales from one year to another.
– Stable market shares all over the study period, despite the
increase in annual local sales.
– This indicates that the 2003 agreement is still prevailing and
that the Companies aren't competing with each other to
increase their market shares despite, the availability of
unutilized capacities in large Companies, and substituting this
by increasing prices collectively.
 L oc al Market S hares (2002-2006)
35.0%
30.0%
25.0%
S hares

20.0%
15.0%
10.0%
5.0%
0.0%
2002 2003 2004 2005 2006
Y ears
A B C D E F G H I
 Indicators assuring agreement between companies to
raise prices and limit marketing (CONT.):

5. Non stable export sales shares

The Companies export shares are very different from a year to

another among different companies. This shows that there is
no agreement to limit the marketing of the cement abroad and
the agreement is valid only in the local market.
 E xports S hares (2002-2006)
0.6
0.5
0.4
P ric es

0.3
0.2
0.1
0
2002 2003 2004 2005 2006
Y ears

A B C D E F G H I
 Indicators assuring agreement between companies to
raise prices and limit marketing (CONT.):

6. Production capacities utilization

The increase in the production capacities utilization of the

companies from a year to the other did not reflect on the
structure of the companies’ market shares of local sales,
which are stable as they were since 2003 agreement.
   2002 2003 2004 2005 2006

A 62.9% 64.5% 63.0% 73.1% 76.1%

B 70.6% 74.3% 75.3% 86.6% 89.2%

C 96.0% 75.8% 61.7% 68.2% 61.1%

D 95.2% 88.3% 82.4% 94.7% 97.4%

E 87.9% 85.6% 48.2% 62.2% 67.1%

F 82.9% 93.2% 91.7% 96.7% 99.2%

G 100.5% 93.6% 87.1% 100.4% 124.8%

H 52.6% 77.5% 94.6% 120.9% 121.1%

I N/A 65.9% 64.0% 87.8% 117.0%

TOTAL 75.3% 75.0% 69.6% 80.9% 84.3%

 THANK YOU

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