Investigation into Statoil Ireland
November 4, 2003
Outcome of investigation
In 2002 the Competition Authority (“the Authority”) initiated an investigation into possible breach of competition law in Letterkenny by Statoil Ireland Limited (Statoil) and its motor fuels retailers in the town. The Authority had concerns that the Price Support Agreement (PSA) operated by Statoil with independent retailers of motor fuels may have acted as a constraint on competition and thus harmed consumers.
After the Authority informed Statoil of its intention to initiate legal proceedings, Statoil abolished the PSA scheme and undertook not to implement or introduce any system that would have the effect of reducing the incentives for petrol retailers to compete with each other on price and services for the business of motorists.
On foot of Statoil’s undertakings, the Authority closed its investigation.
Outline of case
In 2002 the Authority initiated its own investigation into possible resale price maintenance in Letterkenny by Statoil and its three motor fuels retailers in the town. This followed an earlier investigation by the Authority into allegations of retail price fixing in Letterkenny among motor fuels retailers. That investigation was closed.
During the course of that investigation it came to the Authority’s attention that Statoil was operating a scheme, the PSA, with independent retailers of motor fuels. These agreements provided financial support to Statoil retailers in order to match the price of selected motor fuels retailers that are most likely to compete with the Statoil stations. However, as part of the agreement the Statoil branded station owner was not allowed to charge more than the Statoil recommended retail price and would not receive price support from Statoil for any price cut below the marker stations.
The PSA combined a ceiling on price – the recommended retail price – and a floor – one charged by strategically located rival motor fuels retailers. Rival stations knew that if they lowered their price then the Statoil branded stations would match their price reductions. Therefore it would appear that the PSA may have acted as a restraint on competition and thus harmed consumers.
A careful examination of the facts of the situation in Letterkenny, in terms of market shares of the Statoil and other stations, the views of the motor fuels retailers and several price surveys, combined with the development of a very simple model, led the Authority to the view that the PSA operated in such a way that it breached competition law.
The Authority informed Statoil that it intended to initiate legal proceedings unless certain undertakings were given to the Authority to amend its behaviour. As a result, Statoil subsequently abolished the PSA scheme as and from midnight on the 31st July 2003 and agreed not to implement or introduce any new support scheme containing the features that the Authority considered breached competition law.
However, it should be noted that Statoil has consistently refuted any assertion that the Price PSA breached competition law.
To learn more on this case read our Enforcement Decision Note relating to Agreements between Statoil Ireland Limited and motor fuels retailers allegedly fixing the retail price of motor fuels in Letterkenny (pdf).
- Section 4 of the Competition Act 2002
- Article 101 of the Treaty on the Functioning of the European Union