The Australian Competition and Consumer Commission has rejected a bid from oil giant Caltex to take over hundreds of Exxon Mobil petrol stations and convenience stores, saying it would stifle competition and drive up petrol prices.
The decision comes as small business minister Craig Emerson has requested the ACCC conduct another inquiry to investigate petrol price-fixing.
The ACCC said the bid will be opposed due to the effect it will have on market competition for the supply of petrol, diesel and automotive LPG. Additionally, it said the acquisition of about 300 sites would affect the stability and effectiveness of other retailers to coordinate petrol prices.
The watchdog said the purchase of 53 Mobil sites would result in “a substantial lessening of competition” if they were acquired by Caltex, “which would be likely to lead to reduced retail competition resulting in higher fuel prices for consumers”.
“As one of the leaders of the weekly price cycle in these cities, this increase in Caltex’s presence would increase the likelihood of stable price increases particularly compared to a situation where some or all of the sites are acquired by more maverick or aggressive retailers,” chairman Graeme Samuel said in a statement.
The ACCC also said it conducted analysis of retail markets, including considerations of traffic flows, road structures and the geographic make-up of areas around these retail sites. Additionally, Samuel said the ACCC considered the alleged “coordinated behaviour” of retail outlets in raising prices on a weekly basis.
“The ACCC considers that this coordination is facilitated through the frequent exchange of pricing information between competitors via the Informed Sources Oil Pricewatch System,” he said.
“While the enhancement of coordinated conduct resulting from the proposed acquisition is likely to substantially lessen competition in contravention of section 50 of the Trade Practices Act, the ACCC is concerned that the Act does not appear to adequately cover facilitating practices which enables such coordinated conduct.”
After the ACCC announced its decision, Emerson referenced the weekly price cycle in his own statement saying he has subsequently requested the ACCC investigate whether price-fixing is involved.
“The Government, aware that the weekly price cycle does not occur in other countries, has been concerned for some time about possible coordinated conduct by petrol companies,” he said.
Emerson noted the ACCC’s observation that petrol companies have discounted heavily during a certain phase of the weekly cycle, “confident of being able to restore profit during the hiking phase”.
“The risk of leading up the price is lessened where the oil company can watch, in almost real time, for price-matching responses and return to the previous price level if competitors do not follow.”
“The Government has asked the ACCC to assess whether coordinated activity among major oil companies is affecting the pattern and height of the regular price cycle to the detriment of motorists.”
Advice is expected to be provided to the Federal Government before Christmas.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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