Potential Competition problems in petrol retailing

On 29th September 2000, the national competition authorities will meet with the European Commission to discuss EC competition issues surrounding prices in the motor fuel market. Crudely put, there are suspicions that the oil companies could be indulging in anti-competitive activities.

The price of motor fuel is comprised of the crude oil price, tax and the cost of refining, marketing and distribution. It is in relation to the latter (refining, marketing and distribution of motor fuels) that competition rules are likely to be relevant. Whilst motor fuel prices tend to be at uniformly high levels at present, parallel pricing behaviour alone will not necessarily be enough for the Commission to establish the existence of a cartel. In addition, high prices do not automatically mean that there is abusive pricing policy by the oil companies; the Commission must also prove that those companies are dominant in the market and that the pricing policy is excessive or discriminatory.

The markets for motor fuel retailing are governed largely by exclusivity arrangements between petrol retailers and refiners, which could have the anti-competitive effect of preventing new entrants into the market and preventing existing retailers from increasing their market share. To prevent such consequences, these arrangements are subject to the provisions of the Commission Regulation on vertical agreements which came into force in June 2000. The principal effect of these provisions is to reduce the maximum period of exclusive agreements from 10 years to 5 years. (Current agreements made under the 10 year provisions of the "old regulation" which the new vertical agreements rules replace, are valid until December 2001).

It is hoped that following next week's meeting, the Commission will be in a position to give more detailed guidance on what actions are likely to constitute anti-competitive acts in this market and its proposals for co-operation with the national competition authorities in the prevention of anti-competitive behaviour on national and EC levels.

Please contact David Marks or Sue Hankey in the London office on Tel: +44 (0)20 7367 3000 or Richard Eccles in the Brussels office on Tel: +32 2 626 2200 if you would like further information on competition issues in the fuel market or alternatively e-mail: [email protected]