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The cold salmon was superb. But the two dozen European businessmen who gathered in the Loggia Room in London's Hyde Park Hotel on February 13 had little stomach for food. It was not the recession that dulled their appetites. It was fear. A lucrative price-fixing conspiracy they had masterminded was threatened with exposure and criminal sanctions.

The French, Swiss, Spanish and British executives who met in the exclusive Kensington Hotel help direct the most powerful, clandestine cartel in the world - the cement cartel. Only OPEC has a bigger impact on economies around the world. In a good year the large European cement companies at the heart of the cartel bilk contractors from London to Rome to Toronto out as much as $8 billion.

Cement powder is the basic ingredient in concrete, along with stone, sand and water. Concrete is used to form bricks, blocks, pipes, culverts and pre-stressed bridge spans. It is the primary structural component of office buildings, dams, tunnels, sewers, highways, airports, sidewalks, driveways and house foundations.

When churning ready-mix trucks back up to job sites, the price for the concrete they disgorge contains a hidden tax imposed by the cartel. The average sidewalk in front of a new house costs an extra $50 to $100 and concrete foundations drive up house prices by at least $1000. Homeowners, governments, real estate developers and businesses everywhere are gouged by this hidden cement tax.

In the past twenty years the multinational cement makers have used revenues to tighten their grip on the worldwide cement industry by buying smaller cement producers, ready-mix concrete makers and stone quarries. Their tentacles have spread into the United States in the past decade and most recently into the newly emerging democracies of Eastern Europe, where they are poised to skim billions of dollars off the top of economic rebuilding and recovery programs. Impoverished Third World nations are a favorite prey when they use their meager resources to build crude concrete-block housing for the desperate poor who flood their overcrowded cities.

From its beginnings early in this century in a series of local agreements among small European cement makers. the cartel has evolved into one of the most sophisticated such operations the world has ever seen. But now it is imperiled by an antitrust probe by the European Commission, the body charged with enforcing antitrust laws among the twelve Common Market countries. The Brussels-based investigators have targeted as cartel members some of Europe's biggest and most influential corporations. Lafarge Coppee and Ciments Francais, France: Holderbank Financiere Glaris Ltd., Switzerland: Italcimenti, Italy: Scancem International ANS, a Norwegian-Swedish conglomerate: Blue Circle, Britain: Cimenetaries CBR, Belgium: and Heidelberger Zement Aktiengesellschaft, E. Schwenk Zementwerk KG and Dykerhoff Aktiengesellschaft, Germany. Several dozen smaller cement makers are also being investigated.

The European cement giants were reluctant to discuss the commission's probe, an investigation that could result in fines totalling close to $1 billion, industry sources said. But Lafarge spokesman Pierre Juston said that his company was confident it could answer all the questions raised by the commission's investigation. "It is not appropriate to comment further at this point, since the proceedings are far from over," he added. Earlier this year a Blue Circle executive told British reporters that his company denied "any collusion whatsoever." Belgium's CBR declined comment, while Holderbank and Ciments Francais did not respond to written requests for information.
 

A lengthy InterNation investigation in Europe, Britain and North America was able to document the inner workings of the cement cartel. It was also discovered that detailed written records were kept of cartel deliberations. Two secret committees met regularly to coordinate the scheme. The group that met this last February at the Hyde Park Hotel calls itself the European Cement Manufacturers Export Committee (ECMEC). It's job, in fact, is to keep the 150-million-ton-a-year European market free from cement imports by erecting an invisible trade barrier around Europe. In the past three years, the committee has effectively eliminated international trade in cement by anyone not part of the cartel.

The export committee was formed after three Greek cement makers decided to try to export cheap cement powder into Western Europe about a decade ago. In June 1986 the cartel decided it was time to retaliate and held a special three-day meeting to deal with what they called "the Greek problem." The European giants used their collective financial might to undercut Greek prices dramatically. Within months the markets in Europe had disappeared. But the cartel shrewdly offered the Greeks a carrot. Holderbank and Lafarge bought some of the cement the Greeks were unable to sell in Europe and shipped much of it to subsidiaries in the United States and Canada. The cartel easily persuaded the Greek and then Turkish cement makers that it was more profitable to cooperate that try to compete against it.

So it was no surprise to find Greek cement executives Rigas Papayannopoulos and Christo Mentzelopoulos at the export committees Hyde Park meeting. Yavus Ermis and Ali Adiguzel from Canakkale, Turkey's major cement exporter were also present.

The real powers at the Hyde Park meeting, though, were the representatives from Lafarge and Holderbank, the two companies that have traditionally dominated the cartel. Hotel records show that Yves Fraisse, vice president of Lafarge Overseas, and two other Lafarge colleagues, along with Javier Fernandez Bescos of Hispacement in Barcelona and top men from Holderbank and Blue Circle, The dominant British cement maker, were at the table.

Another cartel secret committee, the Cement Task Force, carves up the European market. Reputedly run by Markus Akermann, a senior Holderbank vice president who works from a small office in the Geneva suburb of Celigny, it meets frequently to monitor a series of "gentlemen's agreements" among cement makers in France, Spain, Belgium, Germany, Britain and Switzerland. "It irons out the bumps so the cartel keeps operating smoothly," said a cement executive in London.

One of the most telling signs of the effectiveness of the "gentlemen's agreements" is the almost total lack of movement of cement powder between countries in Europe. No French cement goes into Germany, no Italian cement is shipped into France and no European cartel members export into the British market, industry sources say.

Fear is another of the cartel's effective weapons. A source in Paris said: "They use real muscle to control their customers. If an independent ready-mix cement maker in Paris complains loudly about the price he is being charged for cement powder, then his cement supplier will all of a sudden have a shortage of the particular quality of cement powder he needs. The concrete maker will be unable to deliver his product on time and will lose business. This is how the customers are controlled."

The billions of dollars earned from European construction projects enabled the five biggest cartel members to gobble up the U.S. cement industry to the point where they now control about 75% of U.S. cement production. The 85-million-ton-a-year U.S. market is now dominated by Holderbank, Lafarge, Ciments Francais, Scancem and Blue Circle. The cartel members have also purchased numerous cement import terminals on the East and Gulf coasts, giving them a hold over most of the cement imported into the United States. There are now only two independent cement importers between Boston and Houston, and one is a Mafia-controlled facility in New York. With leverage over domestic cement production and cement imports, the European giants are poised to squeeze cement supplies in much of the United States and drive up depressed prices. If billions are spent to rebuild America's roads, bridges, sewers, and inner cities in the coming economic recovery, cement prices could soar from $50 to $75 a ton, U.S. cement industry analysts say.

The cartel members are using another classic ploy to squeeze more money from the U.S. cement market. The European giants have bought up dozens of ready-mix concrete and aggregate suppliers from Boston to Los Angeles in an orgy of vertical integration following a 1985 Reagan Administration decision to eliminate antitrust barriers in the cement industry.

What is in store for the U.S. market can already be seen in Canada. Lafarge, Holderbank, Ciments Francais and CBR have monopolized nearly 90 percent of Canada's cement market in the past fifteen years. Canada's weak antitrust laws and government indifference have allowed the industry to up prices routinely and to buy up most of its cement customers to the point where cement prices in Canada are among the highest in the world-around $135 a ton. The same cement exported from Canada to the United States sells for less than half that amount. Cartel members used their Canadian plants to ship 2.9 million tons into the northern U.S. market in 1990, making Canada the largest source of U.S. imports.

Toronto, until recently one of the fastest-growing cities in North America, is cement heaven. Competition in the cement products business in Toronto was eliminated long ago, so prices for concrete and concrete products have been among the highest in the industrialized world. Almost all ready-mix concrete makers, cement-block makers, cement-pipe makers and sand and gravel suppliers in Toronto are owned by Holderbank, Lafarge, Ciments Francais subsidiaries and the one large independent cement maker in the area. Almost total vertical integration makes price fixing and bid rigging an easy exercise in the Toronto-area market.

A good example is the gouging that occurred during construction of Toronto's giant retractable-roof, 50,000-seat sports stadium. It took 120,000 cubic meters of concrete to build Skydome in the late 1980s. Through inflated prices and rigged bids, the concrete supplier, a Lafarge subsidiary, skimmed about $4 million in excess profits from this job, industry sources calculate. Antitrust regulators in Ottowa are currently investigating cartel control of the Toronto and western Canadian cement markets.

But it is the E.C. probe that has shaken senior executives who run the cartel. They know that public exposure and large fines could make it difficult for their price-fixing scheme to continue. And it could prompt individual countries to institute their own punitive investigations and spark a call for formal international cooperation in monitoring the industry in the future.

Judges will hear the E.C.'s evidence against the industry and the industry's responses in closed-door hearings in Brussels over the nest few months. It is the biggest antitrust investigation ever undertaken by the E.C. for violations of Article 85 of the Treaty of Rome, the antitrust clause in the treaty that formed the Common Market. Should the E.C. probe fail to produce convictions, it could signal that global business crime is immune from effective government scrutiny.

The Nation; 8/3/1992; Ferguson, Jock

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