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UPDATE 1-Brazil fines cement firms $1.4 bln for price rigging, orders asset sales

sales@ (Adds comments from companies, councilor, background)

BRASILIA/SAO PAULO, May 28 (Reuters) - Brazil's antitrust watchdog Cade fined six cement makers a combined 3.1 billion reais ($1.4 billion) for fixing prices for two decades and ordered the companies to dispose of many assets, in a harsh decision that the biggest one said it will challenge in courts.

Votorantim Cimentos SA, Camargo Correa SA's Intercement Brasil, Itabira Agro Industrial SA and Cia de Cimentos Itambé SA, as well as Switzerland's Holcim Ltd and Cimpor Cimentos de Portugal SGPS SA agreed to set prices to force rivals from the market, councilors at Cade said at a hearing that lasted for 10 hours.

Cade ignored the companies' claims that there was no evidence of price-rigging and ordered them to cut installed capacity in concrete-services by 20 percent in large markets. The ruling also requires the companies to do away with any cross shareholdings.

The ruling, which followed an eight-year inquiry, came as allegations of cost overruns have dogged preparations for this year's soccer World Cup. Local cement sales have more than doubled over the past decade and prices have jumped about two-thirds in that period following a commodities-based boom and government efforts to expand roads and other infrastructure.

"This cartel was so strong that it had clear strategic goals," councilor Márcio de Oliveira Junior said. The six companies named in the ruling control about three-fourths of the domestic market for cement and concrete.

Wednesday's decision was slightly milder than councilor Alessandro Octaviani's January proposal, which called for bigger asset disposals. Cade also imposed sanctions on Abesc, an industry group representing concrete producers; ABCP, Brazil's Portland cement group; and SNIC, which represents local cement factories.

Lawyers said litigation could go on for years should the companies appeal. Cade had previously blocked any attempt for early settlements.

One of the lawyers involved, who asked not to be named because of the sensitivity of the case, told Reuters that the severity of the fines and the asset disposals are unheard of in similar antitrust cases around the world. Industry leaders allege that Cade has no legal power to impose any asset sales.

Votorantim will challenge the decision "because it is unjustified, lacks legal basis and ignores market facts," the company said in a statement. SNIC also said it plans to appeal Cade's decision.

The structure of Brazil's cement industry is largely uneven; groups have strong market control over specific regions, increasing the potential for collusion. The number of producers shrank to about 10 in 2011 from almost two dozen in the early 1990s.

Government studies also showed evidence that takeovers and asset swaps between cement companies were made to prevent rivals from entering the lucrative industry.

Under terms of the ruling, Votorantim will have to pay 1.5 billion reais in fines, and Cimpor 297 million reais. Cade fined Intercement Brasil, Itabira and Holcim 241 million reais, 411 million reais and 508 million reais, respectively. Itambé will have to pay 88 million reais.

Votorantim is the largest producer of cement in Brazil, followed by Holcim, France's Lafarge SA and Camargo's Intercement. Holcim and Lafarge are negotiating a merger.

($1 = 2.24 Brazilian reais)

(Reporting by Leonardo Goy and Guillermo Parra-Bernal; Additional reporting by Alberto Alerigi Jr; Editing by Lisa Shumaker and Mohammad Zargham)