Australia’s competition watchdog issued a statement stating it will oppose the buyout of Woolworths’ network of 531 service stations and 12 more sites under development.
“We consider that BP acquiring Woolworths’ service stations will be likely to substantially lessen competition in the retail supply of fuel,” said ACCC chair Rod Sims.
“Woolworths is a vigorous and effective competitor which has an important influence on fuel prices and price cycles in many markets throughout the country. Many consumers seeking out cheaper petrol will head to Woolworths petrol stations.”
According to the ACCC, BP already supplies fuel to around 1,400 BP-branded service stations nationally, and has direct control over setting the prices at around 350 of those sites.
“BP prices are significantly higher on average than Woolworths prices in the major capital cities (see charts below). BP generally increases prices faster than Woolworths during price increase phases, and is slower to discount during the price discounting phase of cycles,” Mr Sims said.
“We believe that fuel prices will likely increase at the Woolworths sites if BP acquires them and other retailers would then face less competitive pressure. The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead.”
Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell was quick to welcome the decision. Yet rather than highlighting the fuel costs of many SMEs, Ms Carnell said the main detriment of the deal would have been on the established franchisees in BP’s network.
“If the application had been approved it would have had a detrimental effect on the commercial value of existing BP-branded operations,” Ms Carnell said.
“These small business owners entered into multi-year commercial arrangements and paid fees to BP to operate under a BP brand.
She added: “The BP-branded sites operate in competition with Woolworths and Woolworths/Caltex-branded sites.”
BP said it was “disappointed” with the ACCC’s decision, but suggested the deal may not be dead in the water.
“We remain confident that, with appropriate divestments as offered by BP, this transaction would not substantially lessen competition,” BP Australia president Andy Holmes said.
“In light of this, we are currently consulting with our lawyers to determine our next steps.”