The European Commission has initiated a detailed second stage investigation into the proposed merger between the oil companies Totalfina and Elf Aquitaine. Totalfina was created following Total’s take-over of the Belgian petro-chemicals group Petrofina in March. The two rival groups have only recently come to an agreement amongst themselves after bitter take-over bids and counterbids this summer. According to the Commission, the merger could create dominant positions in France on the markets for the wholesale distribution of fuels (petrol, diesel, LPG and domestic fuel oil), the retail distribution of fuels on motorways, the production and sale of liquefied petroleum gas (LPG) and the supply of jet fuels to Toulouse and Lyon airports. In September, Totalfina submitted proposed commitments during the first stage of the investigation, but these commitments were considered not sufficiently precise to eliminate the competition concerns raised by the transaction. The areas (all in France) where the Commission thinks the proposed merger raises problems are as follows: · The market for non-network sales of fuels (and the logistics for the storage and transport of fuels by oil pipeline). Non-network sales are sales by oil refineries to large-scale final consumers and to retailers. During the last fifteen years, the French market for the retail distribution of fuels has witnessed a massive market entry by the hypermarket and supermarket chains which, collectively, now account for more than half of all sales. Competition from the new entrants has helped to keep prices down to a level (before tax) which is one of the lowest in Europe. This trend could be jeopardised by the proposed merger, since the new entity would control more than half of refining capacity in France and more than half of storage capacity and the capacity for transporting petroleum products by pipeline. The new entity could therefore to a large extent control independent dealers’ access to the product, and their ability to import would be restricted because of the entities grip on import depots, other storage depots and three main pipelines within France. · The market for the sale of fuels by service stations on toll motorways. The new entity will account for almost 60% of the volume of fuels sold on French toll motorways. The access to this market has been restricted almost exclusively to the oil companies, there is captive demand, and pump prices are significantly higher than outside the motorway network. In the recent decision Exxon/Mobil, the Commission analysed this market and concluded that there was an appreciable lack of competition on it and an oligopolistic supply structure. The notified merger in question could further reduce competition to the detriment of French drivers and consumers from other Member States using the French motorways network. Since the two companies operate through the whole of the motorway network, they are able to monitor other competitors, to co-ordinate joint price increases and, where competitors do not comply, to punish them. Totalfina alone already has 40% of shares of motorway sales. · The market for the production and sale of LPG in France. The two companies will control more than half of French LPG production, most of the storage sites used for imports and most of the petrol filling centres. The new entity will thus become the market leader in all demand segments (domestic, industrial and auxiliary uses) and will be the only independent actor on the market since any other competitor wishing to cover the whole of France would have to obtain supplies from the two companies or obtain access to its logistics. · The supply of contract fuels to Toulouse and Lyon airports. Totalfina and Elf are the sole partners (on a 50-50 basis) of the respective groups set up for the supply of jet fuels to these two airports. The merger will create monopolies in the supply of aircraft fuels. During the second stage investigation, implementation of the merger is suspended until the Commission has taken a decision on its compatibility with the common market. Since some provisions in the agreement would have the effect of implementing the merger before the Commission’s final decision, the Commission informed the two companies that these provisions are in breach of the Community law and must be amended. The proposed merger raises problems only within France. The French competition authorities have accordingly requested partial referral of the case to them pursuant to Article 9 of the Merger Regulation. The request relates to certain markets deemed to be local. Since a detailed investigation has been initiated, the Commission will decide at a later stage on this request for referral. (IP/99/730)
