ACCC: BP, Woolworths deal could hurt competition
On Thursday, the Australian Competition and Consumer Commission (ACCC) flagged preliminary concerns regarding the proposed acquisition by BP Australia of Woolworths Limited’s network of retail service station sites.
The ACCC said the proposed takeover, which was signed in late December 2016 and is due to be completed in January 2018, could cut the number of major rivals selling petrol, reducing the incentive to keep retail prices low.
Woolworths in December said it had agreed to sell its 527 fuel convenience stores plus 16 development sites to BP, which already owns 350 retail sites in Australia and supplies a further 1,050 BP-branded sites
“The transaction would reduce the number of major rivals in fuel retailing. The transaction could see retailers face less competitive pressure to keep their prices low and as a result, motorists may end up paying more at the pump,” said Rod Sims, ACCC chairman.
The ACCC has received submissions from a wide range of interested parties including industry associations, fuel retailers, wholesale fuel suppliers, and both corporate and individual consumers.
“Woolworths appears to influence retail market fuel prices by either leading price reductions, or quickly following other retailers that reduce prices, especially in the downwards phase of metropolitan price cycles,” Sims said.
“The proposed acquisition removes Woolworths’ influence on metropolitan markets and we are concerned that BP would not follow Woolworths’ pricing strategy. Competition may become softer, costing consumers.”
Sims said they are currently investigating this issue from a metropolitan-wide perspective in the major Australian cities.
“The ACCC is also analysing the effect of the proposed acquisition on local markets in the vicinity of individual Woolworths’ service stations across Australia,” Sims said. “It will publish preliminary views on local market issues in coming weeks. BP has stated publicly that it intends to divest sites in certain local areas.”
Another area of concern raised by market participants was the effect of the proposed acquisition on convenience groceries.
“This is another part of the transaction that requires examination to see what the likely impact would be on competition, and prices,” Sims said.
Following the proposed acquisition, BP and Woolworths propose to enter into a commercial alliance including a new retail convenience offering, called Metro@BP. Woolworths’ shopper docket discounts and loyalty programme would also be available at certain BP sites.
The ACCC’s final decision is scheduled for October 26, 2017.
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