Today, the Competition Authority has published four opinions recommending that the Reykjavík City Council, the Minister of the Environment and Natural Resources, Minister for Transport and Local Government and the Fuel Equalisation Fund for Petroleum Products to implement changes to the framework of the fuel market to promote more effective competition.
Opinions are published in connection with market research The competition watchdog in the market. The investigation aims to identify market barriers to competition and take action to reduce them.
Two of the opinions concern planning matters and the allocation of plots, but decisions on these issues can be crucial in the competition for the fuel market. There is considerable variation in whether and how competition considerations are taken into account by local authorities when making decisions on these matters. Although the ministry has interpreted the law to mean that municipalities must take competition considerations into account when planning and allocating plots, at least the City of Reykjavík has not considered itself obliged to do so.
In the opinion of the Competition Authority, the City of Reykjavík's policy and implementation are likely to hinder competition. The city's plan stipulates that the number of petrol stations in the city will be curbed and that their number will not increase. Although the underlying objective is entirely legitimate, there is strong evidence to suggest that the methods the city has chosen to achieve this aim have little or even the opposite effect. The reason for this is, in part, that the city's policy makes it difficult for new or smaller players to enter the market and grow. This reduces the likelihood of effective competitive pressure on incumbent organisations, whereas such competition could compel them to streamline and potentially close unprofitable branches. Instead, the city's policy could lead to incumbent companies holding back on optimisation and the closure of sites.
For these reasons, the Competition Authority makes the following recommendations;
Páll Gunnar Pálsson, Director-General of the Competition Authority:
It is important that the City of Reykjavik reviews its policy on the planning and allocation of plots for petrol stations. One of the fundamental prerequisites for active competition to thrive in the fuel market is that public authorities ensure their laws, regulations and actions do not restrict competition.
Two of the opinions concern the provision of information by the Fuel Equalisation Fund and its governance structure. The information sharing consists, in particular, of the fund collecting and passing on to competitors in the fuel market information about the total sales of all the oil companies, which the companies use, among other things, to estimate their market share. This information is provided on a monthly basis. In the view of the Competition Authority, information exchange of this kind is unequivocally harmful to competition, given that the fuel market exhibits various signs of oligopoly.
The recommendations also state that, in accordance with the fund's legislation, competitors are to cooperate on the nomination of a board member for the fund, or that a single representative from each association sits on the board. When the investigation began, representatives of competitors sat together on the board, but now a single director is jointly nominated. The Competition Authority recommends that the law be amended so that the oil companies have no involvement in the fund's board.
For these reasons, the Competition Authority makes the following recommendations;
In the aforementioned four opinions, the Competition Authority has recommended measures which it considers urgent for public authorities to implement immediately in order to improve competition in the fuel market. In addition to this, the Authority is now seeking the views of market players on possible measures they could take to ensure that there are as few barriers to entry as possible, particularly at the supply and wholesale level, and to promote the independence of competitors. The response of the competent authorities to the above recommendations may be relevant to the resolution of this aspect of the case.
The Competition Authority will provide a further update on the status of the investigation by the middle of this year.
The above opinions are presented following a consultation process where stakeholders and the government were given the opportunity to make comments on Raw food The Competition Authority, which was published with a report at the end of 2015. They were also given the opportunity to take part in further discussions at a conference on competition in the fuel market in the autumn of 2016. More information about the market study can be found. here.
The opinions are issued in accordance with Article 18 and Article 8(1)(c) of the Competition Act No. 44/2005. In accordance with c-item of the first paragraph of Article 8, the Competition Authority is required to ensure that measures by public authorities do not restrict competition and to advise the government on ways to make competition more effective and to facilitate market access. Under Article 18 of the Act, the Competition Authority is tasked with drawing the Minister's attention in an opinion if it considers that a provision of a law or government regulation contravenes the purpose of the Act or hampers free competition.
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