Tank-Weld flagged

Tank-Weld Metals (TW), the leading supplier of steel products in Jamaica, is “likely abusing its dominance in the market by harming rivals and customers”, a report by the country’s fair competition watchdog has concluded.

The report is based on an investigation conducted by the Fair Trading Commission (FTC) into a complaint filed by another company, ARC Manufacturing Limited, alleging that TW was selling steel reinforcing bars – also known as rebar – below cost to the detriment of rivals.

The FTC is the body established by law to enforce the provisions of Jamaica’s Fair Competition Act (FCA).

Enacted in 1993, the law is aimed at helping to promote market competition and protect consumers by regulating business conduct, preventing anti-competitive business practices, and prohibiting the abuse of dominant positions.

The commission said Tank-Weld’s alleged conduct was investigated under Sections 19 to 21 of the FCA, which prohibit any action by an enterprise occupying a dominant position in a market from abusing that dominance to the detriment of effective competition.

CONCLUSION

“The commission concluded that the challenged conduct had and is having the effect of substantially lessening competition in the relevant market,” the FTC said in the 56-page report published yesterday.

“The commission is satisfied that the conduct does not satisfy the conditions for being exempted from being treated as a contravention of the FCA.”

TW has, however, “firmly” rejected the FTC report and signalled that it would be challenged in the Supreme Court.

“We cannot and will not accept a flawed report built on serious calculation errors and produced without basic fairness,” the company said when contacted by The Gleaner yesterday.

“This decision threatens to punish the very company that has invested to achieve great efficiencies and delivered affordable building materials to Jamaicans for decades.”

TW said that for more than 35 years, it has worked hard to keep the price of rebar low so that ordinary Jamaican families, builders, and contractors can afford to build and repair their homes.

“Our efficiency has helped make construction cheaper for everyone across the island. Tank-Weld will fight this vigorously to protect fair competition and to keep building costs down for the Jamaican people,” the company said.

The findings of the FTC investigation come amid a $2-billion lawsuit ARC has filed in the Supreme Court alleging that TW has abused its dominant position in the local rebar market by engaging in predatory pricing.

The trial of the lawsuit is still pending.

In the report, the FTC noted that for several periods between November 2022 and February 2024, TW sold rebar at prices that were below acquisition and replacement costs, causing the company to absorb producer-surplus losses.

Citing one example, it said in November 2022, TW sold rebar at a price that was US$18.43 below the acquisition cost, resulting in a margin loss of 2.3 per cent in producer surplus.

The FTC said it “observed” other instances in December 2022, December 2023, and February 2024 when rebars were priced below the acquisition cost. The losses reportedly incurred were redacted.

The report stated that TW indicated that rebar prices were benchmarked against their replacement cost to meet the competition.

However, the FTC said its investigation concluded that TW’s pricing strategy causes “injury to customers” by “exerting an upward pressure on prices”.

“If the pricing strategy induced the exit of rivals, or led to a cooperative equilibrium, then the strategy would allow TW to exercise market power by increasing price above the competitive (non-cooperative) level. Harm to customers is demonstrated as the power of the dominant firm over price.”

The report found, too, that TW’s pricing strategy “injures” rivals by increasing their costs through higher financing costs associated with absorbing economic loss, diverted the revenues of rivals through reduced market share associated with absorbing economic loss, and induced the exit of rivals through implementation of the strategy over a sufficiently protracted period.

“Harm to rivals is demonstrated as either the power to exclude rivals or the power to raise rivals’ costs. In this market characterised by price competition, rivals match rivals’ prices or lose market share. This means that even equally efficient rivals cannot avoid incurring losses when matching TW’s below-cost prices,” the report stated.

Rebar is an essential component in construction, providing strength and stability to concrete structures ranging from residential buildings to large-scale infrastructure projects.

Between 113,814 metric tonnes and 212,943 metric tonnes of rebar were imported in Jamaica annually over the five-year period starting in 2018.

Approximately 160,135 metric tonnes valued at US$111 million were supplied to the local market between January and November 2024.

livern.barrett@gleanerjm.com