The competition watchdog, the ACCC, has decided to oppose the proposed sale of Woolworths service stations to oil business BP on the grounds that it could lift petrol prices at the bowser.
The Australian Competition and Consumer Commission (ACCC) says BP prices are significantly higher on average than Woolworths prices in the major capital cities.
“BP generally increases prices faster than Woolworths during price increase phases, and is slower to discount during the price discounting phase of cycles,” says ACCC chairman Rod Sims.
Woolworths operates 531 sites and has 12 sites in development. BP supplies fuel to 1,400 BP-branded service stations throughout Australia, setting fuel prices at about 350 of them.
Almost a year ago, the supermarket chain Woolworths closed a $1.785 billion deal to sell its fuel business to BP.
“We consider that BP acquiring Woolworths’ service stations will be likely to substantially lessen competition in the retail supply of fuel,” says Sims.
“Woolworths is a vigorous and effective competitor which has an important influence on fuel prices and price cycles in many markets throughout the country. Many consumers seeking out cheaper petrol will head to Woolworths petrol stations.
“We believe that fuel prices will likely increase at the Woolworths sites if BP acquires them and other retailers would then face less competitive pressure.
“The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead.”
BP said was was disappointed by the announcement fromthe ACCC.
“We remain confident that, with appropriate divestments as offered by BP, this transaction would not substantially lessen competition. In light of this, we are currently consulting with our lawyers to determine our next steps,” said BP Australia President Andy Holmes.
Woolworths says it has worked closely over many months with BP and the ACCC through an extremely rigorous and demanding process.
“BP and Woolworths Group will assess the options over the coming period,” the company says.
The ACCC analysed major retailers’ fuel prices to determine the effect that BP and Woolworths have in both local and metropolitan-wide areas.
This chart highlights the difference between each retailer’s average regular unleaded petrol price and the market average price in Brisbane between January 1 and April 30.
And this chart shows the average price at BP company controlled sites and Woolworths sites, compared to the city-wide average, in Sydney, Melbourne, Brisbane and Perth. The results for Brisbane are different to the above chart due to the different data-sets analysed.