NMa finds insufficient competition petrol market

28 July 2006

Elies Steyger

June 2006

The Netherlands Competition Authority (NMa) reveals in its third and final report on developments on the petrol market (the petrol market scan 2005) that the competition with regard to price between petrol stations on motorways lags behind competition in the rest of the road system.

The proportion of petrol stations which are in the hands of the five big petrol companies for the motorway network has practically remained the same even after petrol stations have been auctioned to provide newcomers with the chance to enter the market. According to the NMa this is due to the way the auction is designed. The current licensees do have a huge advantage when a petrol station is auctioned for the first time. With the first auctioning, the original licensee receives the proceeds of the auction as compensation for the loss of its everlasting license. However since the licensee is allowed to bid in the auction, it has the opportunity to enter with a nearly unlimited offer, to secure the license for another fifteen years. To prevent the original licensee acquiring the license completely for free, it has to pay the difference between its own offer and the next best offer, up to a maximum of 15 per cent, to the highest bidder. The result is that the original licensee never has to pay a price remotely equivalent to the price a newcomer in the market would have to pay. Consequently the auction has not provided much change in the market. The NMa has advised the Minister of Economic Affairs to evaluate the design of the auction thoroughly.

The petrol stations on the motorways use the suggested retail price of the petrol companies, while the stations in the rest of the road system give discounts of up to ten cents per litre. `At the moment, it is not possible to see from the motorway which prices the petrol stations charge, so it is difficult for consumers to make their choice based on price. As transparency with regard to price increases, competition on price is also boosted’ says a member from the NMa Board. He favours `pricepillars’ along the motorways which list the prices per litre and has suggested this solution to the Minister.

This is the third and last time the NMa has reported on the developments in the petrol sector, as was already mentioned in the `petrol scan 2003’. The NMa started the scan as a result of the decision to close the investigation into the petrol market, and not to prohibit the support systems that petrol companies use for their petrol station holders. The NMa will continue to monitor the developments in the future.

Source: press release NMa 8 June 2006, in Dutch, www.nmanet.nl