The European Commission has concluded that the acquisition of aviation fuel supplier Statoil Fuel & Retail Aviation (SFRA) of Norway by its rival BP, a UK based integrated gas and oil company was in line with the EU merger regulation. The decision is conditional upon the divestment of SFRA's activities at the airports of Stockholm, Malmö, Gothenburg and Copenhagen. The Commission had concerns that the few remaining players, would have been unable to sufficiently constrain the merged entity to avoid price increases. The commitments offered by BP address these concerns.
The companies' activities overlap in the provision of fuel to airplanes at the airports of Stockholm, Gothenburg, Malmö (all in Sweden) and Copenhagen (Denmark). The proposed transaction, as originally notified, would have combined two large into-plane suppliers of aviation fuel at these airports and would have reduced the number of suppliers from 3 to 2 at Stockholm, Gothenburg and Malmö and from 4 to 3 in Copenhagen.
The Commission's investigation showed that the barriers to entry the market for new players and even for the expansion of already active suppliers are high, due to difficulties in gaining access to the necessary infrastructure and differences in supply chain costs. Moreover, most airlines appear to have insufficient buyer power to counteract the consequences of an increased concentration in the supply of aviation fuel at these airports. The Commission therefore had concerns that the proposed transaction would have led to price increases for airlines.
In order to address the Commission's concerns, BP committed to divest the target's activities at the four airports concerned. These divestments would remove the entire overlap with regard to the supply of aviation fuel. Moreover, the divestments would allow the entry of an additional aviation fuel supplier at these four airports.
The Commission therefore concluded that the proposed transaction, as modified by the commitments, would not raise competition concerns. This decision is conditional upon full compliance with the commitments.
The Commission also found that the transaction would not lead to competition concerns as regards the other airports concerned by this transaction, because there is sufficient competition from other players or because the companies' activities did not overlap in most of these locations.
The transaction was notified to the Commission on 27 October 2014.
Companies and Products
BP is active across the value chain of oil and gas from the exploration and production over the refining to the distribution of fuel products. BP's activities include the refining of aviation fuel and the into-plane supply of aviation fuel on a global level.
SFRA is a wholly-owned subsidiary of Alimentation Couche-Tard of Canada and it is active in the into-plane supply of aviation fuel at 80 airports in the European Economic Area (EEA), with a focus on Scandinavian airports.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involvingcompanies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days (35 working days if commitments are offered) to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).