GB Oils Signs Undertaking, Oil Market Competition in Isle of Wight Still at Pre-merger Level

Jack Humphrey, Regulatory journalist
September 27, 2011 /

The Office of Fair Trading (OFT) has accepted undertakings offered by GB Oils Limited to address competition concerns on the Isle of Wight arising from its anticipated acquisition of Pace Fuelcare Limited, part of MRH (GB) Limited, preventing a reference to the Competition Commission.

The OFT has a duty to make a reference to the Competition Commission if it believes that a relevant merger situation has been created that may result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

Under the terms of the undertakings, GB Oils has agreed not to acquire Pace’s oil distribution business on the Isle of Wight or its Cowes Terminal, in order to resolve competition concerns that would be raised by the merger.

The OFT carefully assessed and consulted publicly on the proposed undertakings, as well as on the suitability of Pace Petroleum, a wholly owned subsidiary of MRH, to continue operating the Isle of Wight business as a robust ongoing business over the long term.

Before accepting the undertakings the OFT gave notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002.

Some third parties raised concerns that, having attempted to sell the Isle of Wight business, MRH/Pace Petroleum may not be committed to it into the future.

The OFT considered all the evidence on this point but reached the view that MRH/Pace Petroleum is unlikely to close its Isle of Wight business given the continuing value of its Cowes terminal and the fact that it has the resources, expertise and incentive to continue supplying and distributing oil to its customers on the island.

Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.

Amelia Fletcher, OFT Chief Economist and Decision Maker in this case said: “This merger would have led to a virtual monopoly for the supply and distribution of heating oils and transport fuels on the Isle of Wight.

“However, the arrangement…will maintain pre-merger levels of competition for Islanders. The OFT believes that MRH/Pace Petroleum with its extensive experience of providing this service has the resources, the expertise and the intention to continue to operate its Isle of Wight business on an ongoing basis.”

Undertakings in lieu of reference – under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which may be expected to result from it, accept from any of the parties concerned as it considers appropriate undertakings to take any action as it considers appropriate.

 

Share your opinion