A court verdict against nine cement companies is praised by the government but dissatisfies producers, writes Mona El-Fiqi On Monday the curtain closed on the famous first monopoly court case involving cement in the local market. The court decided to impose a fine on nine cement-producing companies, as it was proved that they had unjustifiably raised prices. According to the court verdict, the nine companies will pay LE200 million in fines. The case began when the Egyptian Competition Authority (ECA) issued a report late in 2007 asserting that the nine companies in question had a deal to raise the price of cement while production costs remained fixed. Official investigations proved that representatives from the various companies met to strike a deal aiming to raise the price of cement and to share each company's share of the market. Moreover, the report stated that some factories deliberately reduced their production capacity in order to decrease supply to the markets. Both acts are considered clearly monopolistic. Consequently, the case was referred to the court. The verdict imposed a fine on 20 officials at the nine companies. Each is now set to pay LE10 million, which is the maximum level of a fine according to the 2005 anti-monopoly law. The law as amended in 2008 raised the ceiling to LE300 million. Commenting on the decision, Minister of Trade and Industry Rachid Mohamed Rachid explained that this verdict is the first of its kind since the promulgation of the anti-monopoly law in 2005. The decision, he added, is particularly important in that it helps set the rules for the development of a free market in Egypt. Meanwhile, the verdict will no doubt help correct the attitude of the companies in question; it is by no means aimed at minimising their investment and production activities. According to Rachid, controlling the market and protecting consumers' rights from monopolistic acts is an essential part of the government's economic reform programme. The minister added in a recent press release that the verdict is also aimed at improving the investment climate in general in Egypt since it helps to raise the competitiveness of all companies working in the market, including those nine cement companies. The ECA will meanwhile continue to investigate a number of other cases in a variety of industrial sectors. Considered a victory by government officials, cement producers are dissatisfied with the verdict. The nine cement companies in question continue to deny to this day that their actions were in any way monopolistic. Adel Draz, corporate communication and public affairs director at Cemex, Assiut for Cement -- one of the nine companies fined -- told Al-Ahram Weekly that the cement producers will show full respect for the court decisions. However, Draz added that the company is not happy with the Nasr City court's verdict. "According to the law, the nine cement companies have the right to appeal. So Cemex company intends to do just that, as soon as possible," he said. Cemex company, according to Draz, is against and actively fights monopolistic acts, and has its own internal regulations that prohibit any such acts by its employees. Meanwhile, a high-level source at one of the cement companies, who preferred to remain anonymous, told the Weekly that the cement producers are innocent and that they did not try to raise prices. The source gave an example to prove his point: when energy prices were recently raised on cement factories and caused an increase of more than LE100 on the total cost price of a cement tonne, companies refused to put the burden on consumers, themselves bearing 25 per cent of the increase. But the verdict also has its fervent supporters. Though it is the first of its kind, the decision is in fact insufficient, according to some experts. Cairo University economics professor Ahmed Ghoneim said the decision in itself is good news and that it will likely help control the market -- but insisted that the fine should have been higher still. "The verdict is expected to have a positive impact on all market dealers in different sectors," Ghoneim told the Weekly. Still, "the fine is not high enough, even though it is the highest it can -- it may be because of this that the government amended the law and raised the fine ceiling to LE300 million." Haitham Diab, chairman of Zad Export Expert Company, which deals mainly in exporting construction materials to African countries, agreed with Ghoneim that the value of the fine is minimal in comparison to the companies' profits. Diab added that such fines will not prevent monopolistic acts. Penalties, he said, should include a jail sentence when a company violates the anti-monopoly law. According to Diab, the government should raise the price of the cement components to force cement companies to share their high profits. "The government is currently selling the stones used in producing the cement at the very low price of LE1.2 per metre, which is unfair," he said. The government should also work to regulate the internal market and escalate control supervision campaigns to prevent monopolistic acts, according to Diab. On the other hand, the verdict may have a negative impact on Egypt's reputation, he added, since 90 per cent of the cement producing companies are international, and as such may spread news that the government is interfering in a free market. However, he asserted that this is the government's right to protect consumers. Meanwhile, rumours spread among cement dealers and consumers that the court verdict might lead to a reduction in cement prices by 10 to 15 per cent during the coming period. Experts denied that the decision may have an impact on prices. "Prices are decided according to supply and demand," Diab said. Ghoneim is also certain that the court verdict will not lead to a reduction in prices, and that any reduction over the coming period would be caused by other factors such as the international recession. The nine convicted companies are;National Cement, Misr Qena Cement, Misr Beni Sueif Cement, Beni Sueif Cement, Egyptian Cement Company, Suez Cement, Sinai Cement, Assiut Cement (Cemex)and Amriyah Cement.
