Fuel giants cleared on pricing

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The Independent Online
THE GOVERMENT's competition watchdog, the Office of Fair Trading, came under savage attack yesterday after clearing the big supermarkets and oil companies of driving independent petrol stations out of the market through predatory pricing.

After a year long investigation, the OFT concluded there was no evidence of predatory or collusive behaviour, even though as many as 4,000 independent outlets have gone out of business since a price war broke out in 1996.

The Petrol Retailers Association dismissed the OFT's report as "bland and cosy" and criticised its failure to tackle the problem of exorbitant petrol prices at motorway service stations, where the big oil companies face no competition.

Christopher MacGowan, chief executive of the association, said he was "horrified" at the OFT's response and called on ministers to replace it as the watchdog for the industry.

James Frost, chairman of Britain's biggest independent petrol station chain, Save Group, also criticised the OFT's findings, saying: "I am extremely disappointed that it found evidence petrol was being sold at a loss but then decided everything is all right now. In the meantime 4,000 petrol stations have gone bust."

The investigation was launched in 1996 at the prompting of MPs after Esso embarked on its Pricewatch campaign which resulted in a fierce price war among the oil majors and supermarkets.

John Bridgeman, the Director General of Fair Trading, conceded yesterday that there was evidence that petrol had been retailed at a loss. But he said he did not believe this amounted to predatory behaviour and said that profit margins had recovered even though they remained at historically low levels.

Since 1990, when petrol retailing was last investigated by the Monopolies and Mergers Commission, the share of the market taken by the supermarkets has soared from 5 per cent to 23 per cent. At the same time pump prices have fallen by about a third in real terms - that is excluding duty, VAT and inflation - while the number of petrol stations has fallen by more than a fifth to fewer than 15,000.

By far the biggest casualties have been independent retailers where the number of stations has declined from 12,561 in 1988 to fewer than 10,000 now and market share has collapsed from 49 per cent to 28 per cent. The "big three" of Esso, Shell and BP/Mobil continue to account for 52 per cent of all petrol sold.

Mr Bridgeman said that despite the sharp fall in the number of outlets, down from 40,000 in the mid-1960s, motorists ad been well-served by the competition between the oil majors and supermarket chains. Tesco is now the fourth biggest player in the petrol market while Sainsbsury is in fifth place.

Outlook, page 25