Competition watchdog opposes Caltex's bid to takeover Mobil fuel sites because it would reduce competition and increase petrol prices
December 2, 2009
The competition watchdog has opposed Caltex’s bid to takeover Mobil fuel sites because the acquisition would reduce competition and increase petrol prices.
The Australian Competition and Consumer Commission (ACCC) says it identified 53 of the 302 Mobil service centres which, if taken over by Caltex, would reduce competition in the retail market for the supply of petrol, diesel or LPG.
“The acquisition of these sites by Caltex would be likely to lead to reduced retail competition resulting in higher fuel prices for consumers,” ACCC Chairman Graeme Samuel says.
Mobil is expected to pull out of the Australian market in the next two to three years, and the ACCC says it is best if the sites are purchased by retailers with a greater ability to offer discounts unlike major companies.
“The proposed acquisition would give Caltex a significant share of retail sites in Brisbane, Sydney, Melbourne and Adelaide,” Samuel says.
“As one of the leaders of the weekly price cycle in these cities, the 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.”
The ACCC reviewed the competition in local markets and also looked at the presence of competitors, traffic flows and road structure before making a decision.
The government commission also reviewed pricing systems and considered submissions from consumers, motorists and retail competitors.
Caltex Managing Director and Chief Executive Julian Segal says the company has not yet decided on what it will do.
He says Caltex will wait for the release of a public competition assessment.
“Caltex will then determine what action it will take in response to the announcement,” Segal says.
However, Segal says Caltex is committed to growing its existing business and taking advantage of merger and acquisition opportunities.
Caltex made an agreement with Mobil on May 26 this year to purchase 302 Mobile sites.
Competition and Consumer Law expert Associate Professor Frank Zumbo from the University of New South Wales says the ACCC made the right decision because Caltex’s proposal raised serious competition concerns.
Zumbo says the acquisition of Mobil service stations represents a substantial threat to oil industry competition in major Australian wholesale and retail markets.
He says the ACCC’s decision demonstrates support for the need of competitive independent retailers to keep petrol prices low and to break the hold of Coles and Woolworths on the retail market.
Zumbo says all the Mobil service stations should be sold to independents so the oil companies and the supermarket giants are kept honest to ensure motorists benefit.