Bundeskartellamt presents results of its fuel sector inquiry Oligopoly of oil companies enables uniform pricing at petrol stations

Today the Bundeskartellamt published its "Final Report on the Fuel Sector Inquiry" presenting an in-depth analysis of the competitive conditions in the German petrol station markets.

The President of the Bundeskartellamt, Andreas Mundt, stated: "The five large petrol station operators in Germany are not competing with one another, they have formed a dominant oligopoly. Our inquiry establishes in detail how the price setting mechanisms in this sector work. The market structures are such that agreements are not necessarily required as there is, so to speak, an implicit understanding between the companies. This leads to excessive prices".

Oligopoly in the petrol station markets
The Bundeskartellamt assumes that a dominant oligopoly exists in the German petrol station markets between the five large oil companies BP (Aral), ConocoPhilipps (Jet), ExxonMobil (Esso), Shell and Total. The report published today provides significant insights which support this assumption.

Andreas Mundt: "The fact that market dominance has been found to exist is of essential importance for our authority's work in the fuel sector. Based on our findings we will prevent any further concentration in the petrol station markets and ensure that the oligopolists do not abuse their market power."

The members of the oligopoly jointly hold substantial market shares with the absence of substantial competition between them. The large five account for 65% of fuel sales in Germany. Furthermore, the fuel markets are very transparent: Prices can be easily observed by all market participants. All of the five companies use a system for monitoring and reporting prices which makes it possible to react promptly to any changes. In its report the Bundeskartellamt also illustrates that the many links between the oil companies and interdependencies in a system of fuel exchange agreements make it difficult for members to break away from the oligopoly. Any deviating behaviour by a member could immediately be economically punished by the others.

Pricing at petrol stations
In addition to examining structures in the market, the Bundeskartellamt has collected and analysed data on all price changes from 1st January 2007 to 30th June 2010 at more than 400 representatively selected petrol stations of 19 oil companies in the greater areas of Hamburg, Leipzig, Cologne and Munich. A differentiation was made between petrol and diesel fuel. The Bundeskartellamt's analysis is the first systematic examination of petrol station prices in Germany which is based on objective data. The results show that the oligopolistic market structure enables the large oil companies to set prices more or less uniformly at their petrol stations. As a result of the companies' systematic price monitoring and centrally controlled pricing, precise price-setting patterns have been established.

It is clear from the results of the sector inquiry that in nearly all cases Aral or Shell initiate the largely super-regional price increases, that the respective other company adjusts its price after exactly three hours, and that the other members of the oligopoly also follow suit in set time periods. The analysis shows that there are generally more individual price cuts than price increases but that these are localized and, on average, in much smaller cent amounts than the increases. Fuel prices are generally highest on Fridays and lowest on Mondays. The inquiry also confirms the widely held assumption that the price level rises at the beginning of holiday periods, which, contrary to the assertions made by the mineral oil sector, cannot be explained merely by particularly high demand.

Prospects
The Bundeskartellamt will maintain its previous prohibitive stance in merger control in order to prevent a further concentration of the market. It will also initiate a number of proceedings to take action against established violations of competition law. In view of the oligopolistic price mechanisms, the legislator should examine whether improvements can be achieved by way of regulatory intervention, in the interests of the consumer.

The full report, a summary as well as today's presentation of the report by President Andreas Mundt are available at Internetseite des Bundeskartellamtes.