60/12    12 July 2012

The OFT has today accepted undertakings from Shell UK Limited (Shell) to sell six retail fuel sites and six auto-LPG (liquefied petroleum gas) sites to address the OFT's competition concerns arising from Shell's completed acquisition of 253 petrol stations from Rontec Investments LLP (Rontec).

As a result, the merger will not be referred to the Competition Commission.

The OFT's investigation found that there were no national competition concerns arising from the merger, but there was a realistic prospect that retail fuel prices would rise in the local areas of Guildford (Demon and Stoughton sites), Brenzett, Ewood, Ickenham and Great Barr, and that auto-LPG prices would go up at Stopsley, Fleet, Addlestone, Ducklington, Broughton and Grovebury. Following its investigation, the OFT announced on 3 February 2012 that it was suspending its duty to refer the merger to the Competition Commission because it was considering whether to accept undertakings in lieu of a reference.

In order to address the OFT's competition concerns, Shell offered to divest retail fuel and auto-LPG sites in these local areas. Given that there were relatively few potential buyers for the auto-LPG sites, the OFT decided to insert an upfront buyer provision for those businesses. The buyer proposed for those businesses is Flogas UK Limited (Flogas).

Although the auto-LPG sites are located on Shell petrol forecourts, Flogas will be responsible for setting prices. Shell will have a duty to ensure that those prices are accurately and promptly displayed and that Flogas will have sufficient access to the sites.

The OFT carefully assessed and consulted publicly on the proposed undertakings, including on the suitability of Flogas as a purchaser of the auto-LPG divestment sites. It has not received any representations and has therefore concluded that the undertakings are appropriate to remedy the competition concerns identified in its decision of 3 February 2012.

Amelia Fletcher, Chief Economist at the OFT and Decision Maker in this case, said:

'We were concerned about the possibility of fuel price rises in these 12 areas as a result of reduced competition. These divestments will ensure that motorists in these areas will continue to benefit from sufficient competition when buying their fuel.'

NOTES

1. Download a copy of the undertakings. The OFT's decision to consider undertakings was announced on 3 February 2012.
2. The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 
4. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it. 
5. Upfront buyer - the OFT considered in this case that a necessary requirement to suspend the duty to refer and consider undertakings in respect of auto-LPG was that Shell identify an upfront buyer for the auto-LPG assets at the six divestment sites. A provisional sale to that buyer needed to be agreed before the OFT accepted the undertakings. This means that the OFT was able to consult publicly on the suitability of Flogas as the proposed purchaser during the public consultation period. Before accepting the undertakings the OFT gave notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002.
6. The full text of this decision will appear in the mergers section of this website at a later date.