The Competition Authority publishes today report on preliminary findings from a market study on the fuel market. It discusses in detail the conditions and market practices considered to be barriers to competition, to the detriment of the public and society. It also discusses what measures could be considered to remove these barriers to competition.
The fuel market is of great macroeconomic importance, and it is therefore a cause for concern that a study by the Competition Authority indicates that competition is significantly restricted in a key part of it. The price of road fuel is higher here than in most other Western countries, and the difference is so great that it cannot be explained by the market's small size or the increased cost of selling fuel in this country. Furthermore, the oil companies' mark-ups on road fuel are so high that they indicate limited competition. The inefficient operation of the oil companies in this area points to the same conclusion. The mark-up on fuel sold to businesses (large consumers), however, suggests that there is greater competition in its sale.
In the opinion of the Competition Authority, action is needed to improve the public interest. According to the findings of the report, consumers paid too much for retail petrol in 2014, or an amount equivalent to 4,000–4,500 million króna including VAT, i.e. compared with the price that could be expected if the aforementioned circumstances and conduct were not present.
Increased competition would unleash forces that would benefit society, for example, through more efficient operations by the oil companies, which would lead to lower prices for consumers. For this to happen, it is necessary, among other things, to ensure that new competitors can establish themselves in the market. Experience from abroad shows that independent fuel retailers (e.g. supermarkets) can provide significant competitive pressure on the traditional oil companies. However, there are significant barriers to entry in the domestic fuel market, and this needs to be changed.
The preliminary assessment report is part of a market investigation into whether, and if so what, barriers to competition exist in the fuel market. Its publication invites views from interested parties. The findings of the report are therefore subject to change. Having received the views, the Competition Authority will decide whether it is necessary to take action against any circumstances or conduct that harms public competition. The Competition Authority is authorised to take such measures under Article 16(1)(c) of the Competition Act No. 44/2005.
Páll Gunnar Pálsson, Director-General of the Competition Authority:
„The fuel market does not appear to be functioning as it should and is not providing consumers with acceptable terms of trade. At this stage of the investigation, all indications are therefore that action is needed in the fuel market to improve the public interest and strengthen the Icelandic economy. It is important that companies in the market, their customers, consumer representatives and the government put forward views and proposals aimed at this. It would be best if market participants took the initiative to implement improvements, so that intervention by the competition authorities is less likely to be necessary.“
The deadline for submitting reasoned views and comments on the report is Friday, 19 February 2016.. It is intended that the views submitted will be published on the Competition Authority's website. It is therefore important that those submitting their views identify which information within them they consider to be confidential.
Statement regarding the coverage of the draft assessment report
Information page for the market research
It is possible to Read the original report in a browser.
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