Two of the world’s biggest mining companies, BHP Billiton and Rio Tinto , might be attracting the attention of government anti-monopoly and trade regulators in attempts to protect their share of the world iron ore market.
A powerful Australian politician warned earlier today that both miners ran the risk of breaching international trade rules by deliberately expanding to thwart competition.
Colin Barnett, head of the Western Australian state government, said that the directors of BHP Billiton and Rio Tinto should be worried about how European and World Trade Organization regulators might react to recent statements from some of their executives.
Time For The Directors To Be Nervous
“If I was sitting around a board table in one of those big companies I’d be pretty nervous about what the WTO and European regulators would think about this,” he said.
“It’s a precarious area they’re going into.” The problem, as Barnett sees it, is that BHP Billiton and Rio Tinto might be behaving in a monopolistic way — a timely observation given that a day earlier the Nobel prize for Economics was awarded to a French academic who specializes in the behavior of monopolies and oligopolies.
Nobel Prize Winner Might Have A View
The Royal Swedish Academy of Sciences said Jean Tirole from Toulouse University was one of the most important economists of our time for his work in “understanding and regulating industries with very few powerful firms”.
The global iron ore trade, especially that portion delivered by sea, is dominated by a handful of producers, including Australian-focused BHP Billiton and Rio Tinto, Vale of Brazil, and South Africa’s Anglo American .
What annoyed Barnett is that BHP Billiton and Rio Tinto have launched major expansion programs even as the iron ore price has fallen by 40% over the past year.
For the rest of this column, click here: http://www.forbes.com/sites/timtreadgold/2014/10/14/bhp-billiton-and-rio-tinto-risking-a-monopoly-investigation/