TANK-WELD Metals CEO Chris Bicknell has dismissed accusations that his company is using “predatory pricing” tactics to push its only competitor, ARC Manufacturing, out of the steel market.

The claim was made in a complaint by ARC Manufacturing in an August 16, 2024 letter to competition custodian, the Fair Trading Commission (FTC), asking it to investigate if the prices at which Tank-Weld sells its steel amount to “abuse of dominance” under the Fair Competition Act (FCA). ARC Manufacturing claims that Tank-Weld is selling rebar — the type of steel used in block and steel construction — below cost in Jamaica. Local hardwares, ARC said in its complaint, are offered the construction material at US$650 per metric tonne, about US$27 below the ex-warehouse price that is closer to US$677 per metric tonne before the cost of financing. Calling the pricing strategy “predatory”, ARC Manufacturing has also claimed that Tank-Weld sells the same steel in the rest of the Caribbean for US$750 per metric tonne in its complaint, and has asked the FTC to probe the matter and make a ruling.

But Bicknell, who did not directly address the “predatory pricing” claims ARC made in the complaint, instead pointed out that ARC’s market share hasn’t changed much since a similar complaint was made 15 years ago.

“When ARC filed a similar complaint in 2009 it’s market share in steel was 26 per cent…the FTC investigated and found no breaches. Now, 15 years later, ARC has filed another complaint and claims it’s market share in steel is now 25 per cent,” Bicknell told the Jamaica Observer as he questioned ARC’s claim that Tank-Weld is undercutting steel prices to gain a monopoly.

Apart from pointing out that his company’s pricing strategy has not had any significant impact on ARC’s market share, Bicknell maintains that his prices are fair and competitive.

“There is healthy competition in the steel market, which is exactly what Tank-Weld prefers,” he asserted. “This ensures that we stay on our toes, stay nimble, work hard, and try to do better every day,” he continued.

Bicknell pointed out that before Tank-Weld Metals started in 1988, the steel market was a monopoly with the now-defunct Caribbean Steel whose customers at the time constantly complained about poor service and uncompetitive prices.

“Tank-Weld ended this by introducing good customer service and competitive pricing. Tank-Weld also played an integral role in helping to start and grow some of the largest retailer hardware stores in the business today by working closely with them and providing credit and reliability in supplies at competitive prices,” Bicknell added.

He said Tank-Weld is able to sell cheaper than its competitor because it has made “strategic investments and pursues sound strategies” that bring about efficiency — which is passed on to consumers.

“Tank-Weld Metals has done this for 35 years, which is why we have been able to provide reliable service at high levels of efficiency to our customers. Our contribution to the construction sector has been significant,” he told the Business Observer.

ARC’s 2009 complaint

With ARC now awaiting the results of the investigation by the FTC into its complaint about pricing tactics at Tank-Weld, a review of the 2009 complaint about the same issue showed, as Bicknell alluded, that FTC staff at the time found “no evidence of a breach of the FCA [Fair Competition Act]” and recommended the “matter be closed”.

In that claim 15 years ago, ARC Systems (the forerunner to ARC Manufacturing) said Tank-Weld was selling rebar at an average price of $49,000 per metric tonne, well below the $76,000 per tonne it paid for the steel. ARC in that complaint said in setting the price below cost Tank-Weld could drive other suppliers out of the market, creating a monopoly in steel supply to Jamaica, and then raising the prices again to recoup the losses it had incurred.

But the FTC, while acknowledging that its investigation found that “during the period August 2008 — March 2009 Tank-Weld Metals retailed steel at a price below its acquisition costs”, as suggested by ARC in the complaint, the competition agency in its economic analysis said the selling price was “above the replacement costs, which is determined to be the competitive benchmark price”.

It continued: “With minimal impediments to entry and exit the steel market…[the ease of re-entry]…is likely to be effective in mitigating if not averting attempts by either participant to exercise market power if the other participant exits the market.”

“Even if [Tank-Weld Metals] was to be considered dominant, the economic evidence does not indicate an abuse of dominance, in accordance with the law, given that Tank-Weld’s pricing strategy is consistent with a competitively organised market.”

ARC had also complained that the sufferance wharf operated by Tank-Weld at Rio Bueno in Trelawny gives it an advantage over smaller traders who, “lacking access to this licence, are burdened with higher operational costs, making it difficult for them to compete on prices”, and asked the FTC to review the licence that Tank-Weld holds to ascertain if the company is bringing in any cargo that is not authorised under the licence, and to also assess the impact such a licence is having on the steel/rebar market.

Bicknell did not directly address the complaint that the Rio Bueno Port gives Tank-Weld an unfair advantage, but referred the Business Observer to findings of an investigation carried out into the matter by the FTC, also in 2009.

A copy of that letter seen by the Business Observer showed the FTC, after conducting its investigation, “conclude that the acquisition of the facility, receipt of the relevant licence, and the likely attendant benefits to be derived from the operation of the facility does not constitute unfair competition and is not considered anti-competitive within the context of the Fair Competition Act”.