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The Australian Competition and Consumer Commission blocked BP’s US$1.4-billion (A$1.8 billion) acquisition of Woolworths’ fuel station network after months of negotiations.
According to the competition regulator, the deal would be detrimental to competition on the fuel market by removing Woolworths as a pricing competitor to BP. The UK-based supermajor, the ACCC said, sells fuels at higher prices than the rest of the retailers active on the Australian market in big cities, and the takeover would prompt other retailers to up their prices, too.
What’s more, the watchdog said, BP usually raised fuel prices more quickly than its rivals in Australia, and reduced them more slowly than them. “The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead,” the chairman of the regulator, Rod Sims, said in a statement.
BP had earlier offered to sell of its own fuel stations to make the ACCC look more favorably on the deal, first announced a year ago, but apparently this offer was not enough to win it the approval of the regulator. BP and Woolworths, however, can challenge the ACCC’s decision in court.
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For now, the two companies have expressed disappointment and said they were considering next steps. BP’s Australian head, Andy Holmes, told media the company was consulting lawyers on what to do next, adding that “We remain confident that, with appropriate divestments as offered by BP, this transaction would not substantially lessen competition.”
Woolworths operates 531 fuel stations across Australia, while BP’s network is much bigger, at 1,400 outlets. According to the ACCC, the company set fuel prices at about 350 of these. To come to its decision, the ACCC analyzed price data from major Australian cities, finding that BP’s prices in Sydney, for instance, were 3 cents above the average, while Woolworths’ were 0.2 cents below that level. The watchdog argued that consumers would have to foot the bill of the acquisition by paying more for gas.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.