AGIPPETROLI/KUWAIT PETROLEUM ITALIA (Conclusion of the investigation)
PRESS RELEASE
The Italian Competition Authority concluded the investigation into an alleged restrictive agreement between Agip Petroli S.p.A. (hereinafter referred to as Agip) and Kuwait Petroleum (hereinafter referred to as Kupit), which was notified voluntarily in order to ascertain the impact of the operation on competition in the distribution of oil goods.
Considering that during the investigation the parties changed significantly the terms of the agreement as originally framed, the Authority ruled that the operation did not reduce competition substantially on the final market of oil goods distribution network. However, the Authority reserved the faculty to appraise any possible future anticompetitive effect resulting from the application of the undersigned agreements.
The agreement dealt with the three stages of the oil production process, which are the refining, logistics and distribution. This operation initially was alleged to restrict competition on the final markets of oil goods distribution network.
The Authority focused its attention on agreements relating to the logistics (storage and movement of oil goods to their final distribution). In fact, any coordination between Agip and Kupit in the refining stage was to be considered depending on whether such agreements were or not likely to foster competition between the two companies on the final markets of oil goods distribution network.
In particular, the agreements providing a hard increase in the mutual exchange of finished goods would have led to a notable dependance of Kupit from Agip, with regard to the supply of its distribution network within the areas where stores are located, as well as the perfect knowledge ex ante, on behalf of Agip, of the sale goals of the rival in each area.
In order to remove such distorting effects, Agip and Kupit changed substantially the terms of the agreements concerning the logistics.
In virtue of these new arrangements, on the one hand, the exchange of finished goods between the two companies was eliminated; on the other hand, the clause providing Agip discretionary agreement on the increase in the quantities exchanged with Kupit was cancelled. Lastly, the obligation on Kupit to use Agip and Ip as exclusive suppliers, within the hinterlands relating to the chosen distribution basis, was removed. The system of relationships between Agip, Ip and Kupit, following the new arrangements on the logistics, constitutes an important new event in comparison with the contractual schemes broadly used by oil companies, according to the Italian Petroleum Industry Association's standard. Furthermore, the Authority noted in the recent decision concluding the fact-finding investigation into motor vehicle fuel prices that the contracts of exchange of finished goods among oil companies prevented the parties involved from acting in accordance to competition principles. Such a situation derived both by the rigid ways used to inform ex ante the suppliers of the oil goods quantities which the clients intend to acquire; and by the high incidence of this supply system on the total amount of quantities sold by each oil company (on average 50%) through the distribution network.
The new framework of supply relationships between Agip and Kupit, which was created by the changed contractual terms and conditions concerning the logistics, will allow Kupit to exploit the dominant position held by Agip and Ip in the physical distribution, according to ways that favor independent competitive conduct within the single local markets of oil goods distribution. Indeed, for a long time, Kupit will be ensured the right to obtain from Agip and Ip - in any of their stores - the quantities of products required month by month, without being strictly fixed. At the beginning of every year, in addition, Kupit will have the faculty to implement or not the agreements dealing with the logistics. Therefore, it is possible that improvements in company efficiency as for the petroleum refining and distribution, which the two parties can achieve through the arrangements, can reach the oil downstream markets to consumers' advantage.