OFT looks into pricing at Esso
Thursday 30 November 1995
The Office of Fair Trading is looking at claims of predatory pricing by the petrol retailer Esso, which is involved in a cut-throat battle for business with the supermarkets.
Esso's low-price promotion in Scotland and north-east England has caused alarm among independent retailers, who say many will be forced to close if the campaign goes nationwide. The OFT said it had received several complaints about Esso's PriceWatch promotion, which guarantees to match the lowest prices within two miles of participating stations.
"We are considering the complaints and making inquiries," an OFT spokesman said. A formal OFT investigation in 1990 into petrol retailing provoked a reference to the Monopolies and Mergers Com- mission, which expressed clear concern about a reduction in the number of independent outlets.
Pete Szanto, Esso's retail planning manager, said: "Esso absolutely refutes any accusations of anti-competitive activity. It has never been our intention that PriceWatch could give us any control of the market." Supermarkets have captured about 25 per cent of the petrol market, and the current acute price war in many parts of the UK reflects attempts by Esso, Shell and others to claw back customers. After the rise in petrol duty in the Budget, Tesco and Sainsbury said they would not increase prices until Monday, and Shell is holding prices for the time being.
About 1,000 of the UK's 18,000 petrol outlets have closed this year, and the Petrol Retailers Association estimates that another 7,000 may go within the next two years.
Bruce Petter, director of the PRA, said the OFT should consider another reference to the MMC because Esso's campaign "was devised to give them complete control of the market by forcing out the competition. With Esso apparently selling below cost, there is no way that independent retailers can compete with artificially low prices."
The PRA estimates that the average price in the North-east is about 44.9p, compared with 52.9p in the South-east.
Location used to be the most important factor behind choice of petrol station, but motorists are prepared to drive further and further to find lower prices. Supermarkets make a nominal profit on petrol, and use low prices to lure customers into their superstores.
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