Competition: Commission Increases Competition in Spanish Service Station Market

IP/06/495

Brussels, 12th April 2006

Competition: Commission increases competition in Spanish service station market

The European Commission has adopted a formal decision under EC Treaty competition rules which renders commitments entered into by REPSOL to open up its long term agreements with service stations legally binding. REPSOL will free hundreds of service stations from long-term exclusive supply contracts. This will bring a wider choice and scope for reduced prices to the benefit of the consumer. The Commission had been investigating whether REPSOL’s supply contracts violated EC Treaty rules on restrictive business practices (Article 81) but has now closed its investigation in the light of the commitments submitted by REPSOL.

Competition Commissioner Neelie Kroes commented: “Competition in the Spanish petrol stations market is hampered by many long-term exclusive supply agreements. REPSOL, the largest supplier in the Spanish market, has agreed to give up all of them. This will restore competition for a large number of stations and ultimately benefit consumers in a market where prices have gone up substantially in the past eighteen months.”

The commitments have been offered by REPSOL Comercial de Productos Petroliferos (“Repsol CPP”), incorporated in Madrid, Spain, a company belonging to the Repsol-YPF oil group. While the group is active in the whole chain of oil products, REPSOL CPP is active mainly in the distribution of fuel, lubricants and similar products for motor vehicles in Spain.

The commitments offered by REPSOL CPP relate to the distribution of motor fuel (petrol and diesel) to service stations. REPSOL CPP will allow all service stations with which it has signed long-term supply contracts to terminate these contracts, subject to compensation. The mechanism to calculate the compensation has, however, been designed so as to give a financial incentive to stations to end their long-term contracts. Furthermore, REPSOL CPP will not sign any new exclusive supply contract of a duration exceeding five years. REPSOL CPP will also abstain from purchasing stations that it does not supply. Finally, REPSOL CPP will ensure complete freedom to service stations in its network to offer discounts on the retail price.

The implementation of these commitments will provide for the first time a real choice of petrol suppliers for a large number of service stations in Spain and ensure that all stations in the network of the main operator can provide discounts. This will bring a wider choice and scope for reduced prices to the benefit of the consumer. REPSOL’s commitments will also set a benchmark for the few other competitors who still maintain similar practices.

A monitoring Trustee will supervise compliance with the commitments. The text of the commitments and the Trustee’s mandate and contact details will be published on the Commission’s website.

The Commission decision, based on Article 9 of the procedural Regulation 1/2003 on the implementation of the EC Treaty’s competition rules, takes into account the outcome of consultations on the commitments offered by REPSOL. This decision ends the proceedings concerning the exclusive supply agreements. However, if REPSOL were to break its commitments, the Commission could impose a fine of up to 10% of REPSOL’s total turnover without having to prove any violation of the EC Treaty’s competition rules.

(see also MEMO/06/163)