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Introduction
This paper will recommend to the President of Executive Jets of Daytona and investors on the appropriate fleet mix and cost of recapitalizing the company’s fleet with a new Cessna Citation CJ2+s and Pilatus PC-12NGs. The new fleet combination should be able to serve the company’s customers, who are categorized as: those from large companies, those from medium-sized companies, and leisure travelers. Accordingly, the fleet combination should have a Cessna Citation CJ2+s to serve customers from large companies, who are always willing to save even modest time and those from medium-sized companies who prefer jets for long trips. It should also have a Pilatus PC-12NGs to serve leisure travelers, who are usually not willing to pay premium prices to save time and also have heavy baggage, and some of the passengers from medium-sized companies who are sensitive to cost and prefer this plane when traveling over short distances. This report will cover the market requirements, each aircraft’s market fit, operational concepts of each aircraft, and the acquisition and operating costs of each plane. Finally, it will recommend the best fleet combination.
Market Requirements
The customers served by the Executive Jets of Daytona are divided into three categories: those from big companies, those from medium-sized companies, and leisure travelers. Each group of customers has unique travel demands, which make the company to use both the Cessna Citation CJ2+s and the Pilatus PC-12NGs. Thirty percent of the Daytona are from big companies, fifty percent are from medium-sized organizations, and twenty percent are leisure travelers. Accordingly, Daytona must have a fleet that can serve the need of each market segment based on their incomes and travel needs.
The main distinction in each market segment is the desire to save time, willingness to pay a premium price, and the cabin size required due to the customer’s luggage. Passengers from big companies grossing between $51 and $90 million are always willing to pay premium amounts to save the even modest amount of time. As a result, the company must operate Cessna Citation CJ2+s aircrafts to serve them. Passengers from medium-sized companies, those grossing between $20 and $50 million per year, value comfort and time but are also sensitive to the cost of travel. Therefore, these customers will take Cessna Citation CJ2+s for long trips and Pilatus PC-12NGs when traveling over short distances. Finally, leisure travelers are usually not willing to pay premium prices to save time. Moreover, they always carry along heavy baggage, such as surfboards and scuba tanks, and thus prefer aircrafts with large cabins, even if they are slow. Therefore, Daytona must operate Pilatus PC-12NGs to serve these passengers.
The 50/30/20 spread of travel by the company’s passenger segments is sustained in each of the company’s mission segment. The passenger load for the company is of two classes: 1-3 passengers and 4-6 passengers. The company’s flights cover distances from 400 miles to 2200 miles. Noteworthy, both the Cessna Citation CJ2+s and Pilatus PC-12NGs fuel midway when traveling for distances of up to 2200 miles since their fuel ranges are of about 2000 miles. The Cessna Citation CJ2+s has a range of 2049 miles (3298 km), and Pilatus PC-12NGs is 2123 miles (3417 km). Also, passengers from medium-sized companies usually use Cessna Citation CJ2+s when traveling for a distance beyond 1200 miles, and they prefer Pilatus PC-12NGs when traveling for shorter distances unless they have urgent appointments. The market chart for Daytona is as shown in the table below.
 
 
Table 1
Market Chart of Daytona

Market Chart
Annual “Aircraft Days” Expended in Support of Missions Characterized by Passenger Loads and Distances
401-600 miles 601-800 miles 800-1200 miles 1201-1800
Miles
1801-2200 miles
1-3 passengers 50 100 100 100 100
4-6 passengers 100 200 50 50 50

 
Aircraft Market Fit
Cessna Citation CJ2+s
The Cessna Citation CJ2+s is an executive jet with an ability to fly long distances at high speed (Cessna 3). The maximum cruise speed of the aircraft is 481 mph (774 km/hr) at the height of 31,000ft and above, and when having a mid-cruise weight (Cessna 8). The CJ2+s has two integral fuel tank, one on each wing, providing a total of 1796 kg (3,961 pounds) of usable fuel (Cessna 8). The average fuel consumption of the plane is 138 gallons per hour (522.38 liters per hour). The Cessna Citation CJ2+s has a range of 2049 miles (3298 km). The aircraft’s interior measures 57 inches tall, 58 inches wide, and 13 feet, 7 inches long (Cessna 8). It thus provides plenty of legroom for up to 8- passenger configuration. It also has two separate baggage areas that have a total volume of 65 cubic feet (1.84 m3) and a total weight capacity of 1,000 pounds (454 kg) (Cessna 8). Therefore, the aircraft provides an ideal environment for passengers who want to travel over long distances (up to 2000 miles) within a short time or those that are sensitive to their time. However, its small baggage carrying capacity makes it unsuitable for leisure travelers, since they always carry much heavy baggage).
Pilatus PC-12NGs
The Pilatus PC-12NGs is a suitable aircraft for leisure travelers and individuals who are not extremely sensitive about their time. The plane has a crew of one or two pilots and a passenger capacity of 6 to 9 seats. The payload of the plane, including full fuel and pilot on board, is 704kg for the cargo plane, 623 kg for the passenger plane, and 438 kg in the 6 seats executive plane (Pilatus 8). The cabin volume of the aircraft is 330ft3 (9.34m3). It has a cabin length of 16ft 11 inches, a width of 5ft, a height of 4ft 10 inch, and a width floor of 4ft 3 inch. The passenger door dimensions are 24* 53 inches, and the cargo door dimensions are 53 * 52 inches. The internal baggage volume is 40ft3 (1.13 m3). The cruise speed of the plane is 528km/h (328 mph). Pilatus PC-12NGs has a range of 2123 miles (3,417 km) and fuel consumption of 66 gals per hour (250 liters per hour) (Pilatus 8). Given the large cabin dimensions of the Pilatus PC-12NGs, which provide it with enough space for passengers carrying heavy and bulky baggage, the plane is suitable for leisure travelers. Since the aircraft can also be configured to have an executive interior, Dayton can configure its planes so that they can be able to carry both executive passengers from mid-sized companies and leisure travelers, who bring along have bulky cargo.
Operational Concept
The Executive Jets of Daytona will operate both the Cessna Citation CJ2+s and the Pilatus PC-12NGs aircrafts in all its trips. As highlighted earlier, passengers from large companies use the Cessna Citation CJ2+s in all their trips, those from medium-sized companies use both the Cessna Citation CJ2+s and the Pilatus PC-12NGs depending on their travel needs, and leisure travelers only use the Pilatus PC-12NGs. Noteworthy, passengers from medium-sized companies use Cessna Citation CJ2+s when traveling for a distance beyond 1200 miles, and they prefer Pilatus PC-12NGs when traveling shorter distances unless they have urgent appointments. The aircraft utilization for Executives Jets of Daytona is as shown in the table below.
Table 2
Aircraft Utilization of Daytona

Aircraft Utilization
Annual “Aircraft Days” Expended in Support of Missions Characterized by Passenger Loads and Distances
401-600 miles
Total PC/CJ
601-800 miles Total PC/CJ 800-1200 miles Total PC/CJ 1201-1800
Miles Total PC/CJ
1801-2200 miles Total PC/CJ
1-3 passengers 50       23/27 100     45/55 100     45/55 100           20/80 100       20/80
4-6 passengers 100     45/55 200     90/110 50      23/27 50             10/40 50         10/40
All passengers 150    68/82 300    135/165 150    68/82 150           30/120 150      30/120
Monthly Demand (Approx.)            6/7              12/14            6/7                  3/10             3/10

 
From the table above, the Cessna Citation CJ+2s’ will make about 48 trips, and the Pilatus PC-12NGs will make 30 trips per month. The Cessna Citation CJ+2s has a maximum cruise speed of 481 mph. Therefore, it is practical to assume that the Daytona’s aircrafts will have an average cruise speed of 330 mph. We can also assume that each aircraft will require twenty minutes for landing and twenty minutes for take-off. Therefore, the average time that will be spent on each mission is shown in the table below.
 
 
 
 
 
 
Table 3
Average Time Spent on Each Mission by Cessna Citation CJ+2s

Aircraft Utilization
Annual “Aircraft Days” Expended in Support of Missions Characterized by Passenger Loads and Distances
401-600 miles 601-800 miles 800-1200 miles 1201-1800 miles 1801-2200 miles
Flying time 109 min 145 218 327 400
Take-off and landing 40 40 40 80 80
Total time 149 (2hrs 29min) 185 (3hrs 5min) 258 (4hrs 18 min) 407 min (6hrs47 min) 480 min (8hrs)
Monthly Demand 7 14 7 10 10
Total Trip hrs. (Approx.) 17hrs 30 min 43hrs 30hrs 20min 67hrs 30 min 80hrs

 
The total number of hours that the Cessna Citation CJ+2s’ will fly each month are 238hrs and 20 min. (Approximately 238hrs). If we assume that Daytona will require its Cessna Citation CJ+2s to fly for only 8 hours per day, then a single plane can carry the company’s passengers for 30 days (238/8). However, it is not possible for an aircraft to operate on all days, without being serviced. Furthermore, all aircrafts must be serviced after 100 flight-hours. Therefore, Daytona should operate two Cessna Citation CJ+2s, so that one can assist when the other is being serviced.
The Pilatus PC-12NGs has a maximum cruise speed of 328 mph. Therefore, it is practical to assume that the Daytona’s aircrafts will have an average cruise speed of 250 mph. We can also assume that each aircraft will require twenty minutes for landing and twenty minutes for take-off. Therefore, the average time that will be spent on each mission is shown in the table below.
Table 4
Average Time Spent on Each Mission by Pilatus PC-12NGs

Aircraft Utilization
Annual “Aircraft Days” Expended in Support of Missions Characterized by Passenger Loads and Distances
401-600 miles 601-800 miles 800-1200 miles 1201-1800 miles 1801-2200 miles
Flying time (Approx.) 2hrs 20min 3hrs 15min 4hrs 45min 7hrs 15min 8 hrs 45 min
Take-off and landing 40 40 40 80 80
Total time  (Approx.) 3hrs 3hrs 45 min 5hrs 25 min 8hrs 30min 10hrs
Monthly Demand 6 12 6 3 3
Total Trip hrs. 18hrs 45hrs 32hrs 30min 25hrs 30min 30hrs

The total number of hours that the Pilatus PC-12NGs will fly per month are 151hrs. If we assume that Daytona will require its Pilatus PC-12NGs to fly for only 10 hours per day, then a single plane can carry the company’s passengers for 16days (151/10). Since some of the company’s trips require its plane to be in full service the whole day (1201-2200 miles), the company must have an additional one to serve other customers who may be traveling on the same day. Furthermore, all aircrafts must be serviced after 100 flight-hours, and there is a need for a plane to serve Daytona’s customers during the service period. Therefore, Daytona should operate two Pilatus PC-12NGs.
Cost
Cessna Citation CJ+2s
The cost of a new Cessna Citation CJ+2s is $7,044,000. Accordingly, two Cessna Citation CJ+2s will cost $14,088,000 (2012 Operation Planning Guide, 4). The variable costs per hour of the aircraft, including its fuel and maintenance expenses is $1,119.18. As a result, the total annual variable costs incurred by the two Cessna Citation CJ+2s planes will be $3,196,378.08 ($1,119.18*12month*238hrs). The fixed costs for each aircraft will be hull insurance, liability insurance, hull insurance per $100, liability insurance per $M, maintenance software programs, and miscellaneous services, which will cost $17,610, $16,500, $0.25, $165, $1700, and $5,676 respectively. The total fixed costs for the two aircrafts will be $87972. The periodic costs of the aircraft are: hot-section inspection, engine overhaul, paint, interior refurbishment, and modernization, which cost $52,494, $239,412, $36,317, $93,166, and $31,089 respectively. Therefore, the total annual periodic costs for each aircraft will be $452,478, making the total annual periodic costs for the two aircrafts to be $904,956. The personnel costs for each aircraft are captain salary and first officer salary, which are $75,327 and $53,139 respectively. Daytona should have three Captains and three first officers to assist in case of sick leave or off. The annual personnel costs for each Cessna Citation CJ+2s will be $128,466, and for the two aircrafts will be $385398. Additionally, Daytona will incur an extra hangar and miscellaneous expense of $23,356 and $4,595 for each aircraft. In this regard, the cost of operating a fleet of two Cessna Citation CJ+2s will be $18,718,606.
Pilatus PC-12NGs
The cost of a new Pilatus PC-12NGs is $4,581,742. Accordingly, two Pilatus PC-12NGs will cost $9,163,484 (2012 Operation Planning Guide, 3). The variable costs per hour of the aircraft, including its fuel and maintenance expenses is $625.57. As a result, the total annual variable costs incurred by the two Pilatus PC-12NGs planes will be $1,133,532 ($625.57*12month*151hrs). The fixed costs for each aircraft will be hull insurance, liability insurance, hull insurance per $100, liability insurance per $M, maintenance software programs, and miscellaneous services, which will cost $28,407, $5,500, $0.62, $220, $2,500, and $2,938. Therefore, the total fixed costs for the two aircrafts will be $84,490. The periodic costs of the aircraft are: hot-section inspection, engine overhaul, paint, interior refurbishment, and modernization, which cost $17,200, $322,792, $31,521, $61,907, and $22,035 respectively. The total annual periodic costs for each aircraft will be $455455, making the total annual periodic costs for the aircrafts to be $910,910. There will also be training costs of $8,000 for each pilot and $4,050 for the maintenance team of each aircraft. The total training and maintenance costs for the two aircrafts will be $24,100. The personnel costs are captain salary and first officer salary, which are $60,900 and $32,756 respectively. Daytona should have three Captains and three first officers to assist in case of sick leave or off. The annual personnel costs for each Pilatus PC-12NGs will be $93656, and for the two aircrafts, it will be $280968. Additionally, Daytona will incur an extra hangar and miscellaneous expense of $16,713 and $2,360 for each aircraft. In this regard, the cost of operating a fleet of two Pilatus PC-12NGs will be $11,635,630.
Recommendation
The purpose of this report is to advise the President of Executive Jets of Daytona and investors on the appropriate fleet mix and cost of recapitalizing the company’s fleet with a new Cessna Citation CJ2+s and Pilatus PC-12NGs. Therefore, this report will enable the management to implement strategies that will make Daytona manage its operations efficiently. The analysis of Daytona’s market has shown that the company has three distinct customer groups: those from large companies, those from mid-sized companies, and leisure travelers. Each of this customer groups has their unique travel preferences, with those from business companies being sensitive to time, those from medium-sized companies considering both time and price, and leisure travelers who are not interested in saving time but prefer large cabins. Due to Daytona’s market base, the company should use both the Cessna Citation CJ2+s and the Pilatus PC-12NGs aircrafts. The Cessna Citation CJ2+s offers fast and high-quality executive trips while Pilatus PC-12NGs is slow but has a large and spacious cabin. Daytona fleet should be composed of 2 Cessna Citation CJ2+s and 2 Pilatus PC-12NGs aircrafts, which will make the company serve all its customers comfortably.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Works Cited
“2012 Operation Planning Guide.” Available from http://awin.aviationweek.com/portals/awin/pdfs/BCAOpPlanningGuide/2012_Production.pdf
Cessna. “Specification and Description: Unit 525A-0490 to TBD.” Citation CJ2+, Aug. 2011. Available from https://web.archive.org/web/20141026194244/http://cessna.txtav.com:80/~/media/Files/citation/cj2/CJ2%20SD%20Unit%200490%20To%20TBD.ashx.
“Monthly Program Profile: Pilatus PC-12.” The Weekly of Business Aviation, 29 Feb., 2016, p.10-11. Available from http://images.link.pentonaviation.com/Web/PentonAv/%7B41675d71-e8ce-4984-b784-9c7313a174cd%7D_The_Weekly_of_Business_Aviation_02-29-16_BAV.pdf.
Pilatus. Just the Facts. PC-12 NG Overview. Available from https://www.pilatus-aircraft.com/data/document/Pilatus-Aircraft-Ltd-PC-12NG-JustTheFacts.pdf.
 
 
 
 
 
 
 
 
 
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Competition Commission Cement Investigation – CC v Lafarge Tarmac
Summary
The Anglo/Lafarge, joint venture case, was opened in 2012 and closed in 2016. This case investigated an intended partnership between Tarmac, a subsidiary of Anglo American, and Lafarge to establish a new business (joint venture) in the United Kingdom (UK). The two companies planned to contribute equally to the joint venture in the production of cement, aggregate, cement, asphalt, and RMX (Gov.UK (a), 2018.). Since the relevant activities in this paper are those about RMX and cement.
From the investigation, the CC established that the cement market had been coordinating to fix prices, which had an adverse effect competition. However, the CC was unable to identify whether the major cement producers were using tacit collusion strategy or a cartel. Further, the CC concluded that the coordination between the major cement producers resulted in high prices, which was shown by the three largest cement firms having a stable EBITDA or even an increase between the year 2007 and 2011, when the country’s economy was in ruins (Gov. UK (a), 2018). During the stated period (2007-2011), there was a national decrease in demand of 36% and businesses nationally, including cement firms, should have had a decrease in the EBTIDA.
Additionally, the investigations also showed that the cement manufacturers were using the tit-for-tat share balancing tactics, cross-sales as a mechanism for transparency, signaling, and on occasion share balancing. The companies were also using price announcement behaviors, which were contributing to price parallelism and the softening of customer resistance to price increases. Finally, these firms were targeting importers beyond normal competition through speed of service and price.
The CC suggested that the main problem within the market was tacit collusion rather than cartel. Their reasoning was founded on the fact that the market was highly concentrated with producers who were selling homogeneous producers. Additionally, the established producers had a lot of information about each other since the market was too transparent. Therefore, they concentrated on retaining their market shares rather than competing. The investigation showed that the Lafarge Tarmac joint venture was in a highly concentrated market and the producers were manufacturing and selling homogeneous products. This strategy was making prices to stay high since the firms had adopted an anticompetitive behavior that was beneficial to all parties of the cartel. The oligopoly had also created high barriers of entry into the cement market, which made it difficult for new entrant to participate in the cement sector. Overall, the non-competitive cement market made cement users in Britain to lose 30 million pounds annually, which could have been used to develop other public infrastructure and enhance public welfare. Due to these issues, the CC was compelled to intervene so that it could prevent future losses among cement buyers, which would be occasioned by the overpricing of cement.
Remedies
The CC recommended four major remedies for the Anglo/Lafarge merger, which were:

  1. Cement plant divesture remedy
  2. Transparency-reduction measures
  3. GGBS remedy

Cement Plant Divesture Remedy
In the cement plant divesture remedy, Lafarge Tarmac merger was to divest either its Cauldon plant or the Tunstead plant. Regarding the supply of limestone, which is used in cement production, the joint venture had the option of divesting Cauldon quarry if the Cauldon plant was sold. In the case the Tunstead plant was the one divested, the joint venture could either sell all or part of the quarry to the buyer of the Tunstead plant. Alternatively, the joint venture could enter into a long-term supply agreement (on arm’s length terms) with the buyer of the Tunstead plant for guaranteed supply of limestone. The divestment was to also include depots that can operate sufficiently as stand-alone cement plants (Gov. UK (a), 2018). Moreover, the buyer of either Cauldon or Tunstead would have the option buying some fixed RMX plants. In addition, a non-coordinating Great Britain plant was to be given the opportunity to participate in the joint venture.
Remedy on Transparency
To reduce the level of transparency in the cement sector, which could facilitate tacit collusion, the CC established that the GB cement market data, which is published in the MPA and BIS, should have a time lag that is more than three months before the information is made public. Additionally, an order was to be issued that would prevent any GB cement produces from providing sales and production data that had not passed the three-month time lag to third parties, unless where such information would be used for a company’s internal operations.
GGBS Remedies
Hanson was required to divest one of its three active GGBS plants. According to the CC, the most suitable plant was the one at Scunthorpe. Nonetheless, CC would still accept other divestures, such as the Port Talbor or Purfleet plants, if Hanson could proof that it manage the risks associated with these divestures. The GGBS plant divesture would include the full transfer of assets and operations on a stand-alone basis. In addition, Lafarge Tarmac was required to continue its operations with its GBS supply agreement with the acquirer of the divested GGBS so that it could give effect to its novation. The purchaser of the divesture was not to be a GB cement producer, and was to agree not to sell the acquired GGBS plant to a GB cement producer.
Relevant Economic Theory
Cartel: Transparency and Tacit Collusion
Enhanced transparency in the producer side is anti-competitive. It is extremely difficult for firms that are unaware of their competitors’ prices to have tacit collusion because it is much harder to detect price undercutting. Therefore, an increase in transparency enhances tacit collusion. An increase in transparency in the consumer side can counter the effects of transparency in the producer side. In a static setting, a market becomes more competitive as a firm’s demand elasticity increases (Schultz, 2003). The increase in elasticity of demand usually makes firms to become more willing to undercut their competitors, which can destabilize collusions. Given that more severe forms of punishment are possible in a transparent market, a transparent market facilitates collusion (Whinston, 1990). The net effect of these two forces is what determines the level of collusion (Schultz, 2003). In homogenous market, such as the cement market, a change in transparency has no significant effect on collusion (Porter, 1983).
Kinked Demand Theory
If a firm in an oligopoly decides to change its prices, the others in the industry can either follow or ignore. If a firm increased its prices, other firms will not follow, which will allow them to acquire the market share of the one that has increased its prices (Levenstein and Valerie, 2006; Ruhmer, 2011). In case a firm lowers its prices, the other forms in the industry will follow so that they do not lose their market share. Therefore, the demand curve at this level becomes inelastic because firms react in a similar manner (Fraas and Greer, 1997; Davies, Olczak, and Coles, 2011). Therefore, in an oligopoly, if one firm raises its price, it will lose its market share to others. If a firm lowers prices, all firms lower prices, which makes them to be less profitable (“Oligopoly Pricing Models,” n. d.).
Contestable Market Model
The contestable market model is one based on barriers to entry and exit, which determine a firm’s price and output. In the cement industry, the initial establishment cost is prohibitively expensive, which forms a barrier to entry (“Oligopoly Pricing Models,” n. d.). If barriers are high, oligopolistic set high prices, and when they are low, they will set a low price to discourage other firms from entering (Davies, Olczak, and Coles, 2011).
Arguments For and Against the Decision
Arguments for the Decision
The joint venture would lead to an increase in the available information among the market players. The presence of fewer players in the market would enhance the likelihood of all companies knowing the downward stream market conditions for cement, which will improve the possibility of businesses colluding and reducing consumer welfare (Fudenberg and Eric, 1986; Selten 1973; Martin, 2006). The requirement for diversification and acquisition of the property by a non GB player would increase competition.
The formation of the joint venture would also result in better alignment of incentives to coordinate, which would enhance Lafarge’s ability and motivation to punish firms due to the improved symmetry in vertical integration (Gillett and Ingo, 1999; Gov.UK (a), 2018). In the pre-merger joint venture state, Lafarge is highly exposed to external market; therefore, the punishment of deviations by others can be more costly to the company. Additionally, the establishment of the joint venture will result in the elimination of Tarmac, which will increase the rate of concentration in the market.
Finally, the post-merger joint venture would lead to symmetry in spare capacity and vertical integration. There will also be enhanced symmetry in vertical structures after the merger (Fonseca and Normann, 2008). Overall, the increased levels of symmetry will lead to more welfare cost. In summary, the joint venture will facilitate the three conditions of coordination, which are a monitoring position, a credibility position, and a deterrence condition.
Argument Against the Decision
In some cases, the establishment of a joint venture, such as the Anglo/Lafarge joint venture can enhance efficiency in a sector. Norman (2009) opines that joint ventures result in more efficiency if it is assumed that the upstream input is sold at linear prices instead of two-part tariffs (Bon, Francesca, and Randal, 2012). Linear prices do not make the business to realize maximum profits since this would only occur when there is double marginalization. Therefore, although vertical mergers may facilitate upstream collusion, this collusion will not result in a decrease in welfare (Bagwell and Robert, 1997). Actually, by the vertical mergers removing double mark-ups, they may eliminate the effects of increased upstream coordination.
Overall Conclusion
The divesture in the cement and RMX plants would reduce the market concentration of the production of cement in United Kingdom. The Lafarge Tarmac partnership had the potential of resulting in concentrating the production of cement in three major companies. However, the measures implemented by the CC ensured that the concentration in the cement and RMX market was reduced since the divested cement, quarry, depots, and RMX plant of Lafarge and Tarmac were to be sold to a non GB cement producer.
The regulation requiring the firms to only make data that was three months or more public through publishing in the MPA reduced the level of collusion in the market. The time lag in the publication of data made firms less aware of their competitors’ prices, which reduced the chances of them forming tacit collusion since it would be harder for them to detect price undercuts (Andreoli-Versbach and Jens-Uwe, 2015; Davies, Olczak, and Coles, 2011; Annesley and Tessa, 2009).
The divesture of Hanson GGBS plant reduced the concentration of this sub-market. The joint venture would have resulted in more concentration the GGBS market, with the market leader being Hanson. Therefore, the requirement that Hanson divest its plant to a non GB company ensured that the level of concentration in the GGBS market was reduced (Devetag, 2003).
Wide Implication Beyond the Specific Case
What happened in the cement market in the UK can happen in other industries in the future. The likelihood is specifically great in markets that are highly concentrated, sell homogeneous products, sellers have significant knowledge of the other firms’ prices and outputs, and where there are significant barriers to entry. In the Anglo/Lafarge case, the CC proposed the parties in the joint venture to divest some of their cement plants and large RMX plants.
Besides ensuring that the companies had diversified, the CC should ensure there is a reduction in factors that can promote tacit collusion. The CC should ensure there are no price announcement behaviors. It should also target for importers that purchase more than necessary for competition, and also the speed of service and price at which these products are sold. Finally, CC should check for tit-for-tat tactics used in ensuring share balancing. Whereas these policies were primarily established for the cement sector, they can be applied in other markets such as the grocery and supermarket stores sector.
Competition Commission Supermarket Investigation: CC v Tesco
The investigation report of the CC vs. Tesco case was first published in 2008. Although the CC acknowledged that the competition was good, it noted that there was a need to investigate Tesco since its dominant position created a barrier to entry in the market (Gov.UK (b), 2018). From the investigation, it was established that competition in the supermarket sector was mostly good. Nevertheless, the CC argued that in concentrated markets, there is little competition, which results in customers getting poor quality goods and services.
Land resource and restrictive contracts with key suppliers were the main barriers to entry in the grocery sector. These barriers are similar to the high capital outlay and ownership of mines needed for entering the cement sector. The Lafarge Tarmac case requirement for companies to divest some of their assets was still applied in this case. Similarly, the CC established a controlled land order, which enabled the grocery market to be more competitive since small grocery stores got access to land in concentrated-areas (Trapp and Josh, 2009; (Levenstein and Suslow, 2013). Additionally, the prohibition against imposing restrictive covenants and enforcement of any existing exclusivity agreement by the CC for all large retailers would reduce the barriers to entry and ensure small grocers can compete. Importantly, this strategy had the potential of reducing market concentration.
Besides these guidelines, the CC can in the future require supermarkets and other firms to delay the presentation of their financial data, by up to three months, just as in the cement sector, to reduce the level of transparency among large retailers in this market, which reduce chances of tacit.
 
 
 
 
 
Reference List
Andreoli-Versbach, Patrick and Jens-Uwe, Frank, 2015, “Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets.” Journal of Competition Law and Econometric, vol. 11, no. 2, pp. 463-92.
Annesley, Katharine, and Tessa, Finlayson, 6 May 2009, Competition Appeal Tribunal’s Judgment in Tesco’s Appeal Against the Outcome of the Competition Commission’s Groceries Market Investigation. Bird & Bird, www.twobirds.com/en/news/articles/2012/competition-appeal-tribunal-judgment-tesco-appeal-ccgroceries-market-investigation. Accessed 16 April 2018.
Bagwell, Kyle and Robert W. Staiger, 1997, “Collusion Over the Business Cycle,” RAND Journal of Economics, vol. 28, pp. 82-106.
Bon Julie, Pietro Crocioni, and Francesca Sala, 2013, ‘There is always a first time: Coordinated effects via vertical Structural Changes in Anglo/Lafarge. Competition Policy International, vol. 9, no. 2, 2013, pp. 139-154.
Bon Julie, Francesca Sala, and Randal Watson, 25 October 2012, The Anglo-Lafarge JV inquiry – Coordinated Effects in Cement. ACE Conference Paris, www.competitioneconomics.org/dyn/files/basic_items/438-file/Anglo%20Lafarge%20CC%20slides%20for%20ACE.pdf. Accessed 16 April 2018.
Davies, S., Olczak, M., and Coles, H, 2011, “Tacit Collusion, Firm Asymmetries and Numbers: Evidence From EC Merger Cases.” International Journal of Industrial Organization, vol. 29, pp. 221-31.
Devetag, G., 2003, “Coordination and Information in Critical Mass Games: An Experimental Study.” Experimental Economics, vol. 6, pp. 53-73.
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