Competition authority investigating the gasoline market
The Hungarian Competition Authority (GVH) has launched a proceeding against MOL Hungarian Oil and Gas Company (MOL) for alleged abuse of dominant position.
The GVH - proceeding within its competence of competition supervision - considers it important to investigate the market practices of the major players of the Hungarian market from time to time, for the public interest in the maintenance of market competition and for the protection of consumers, in case the market players might raise the suspicion of restricting competition.
According to the GVH, the development of fuel prices can be explained by the cumulative effect of several factors, it is influenced among others by the extent of the excise duties, the international market price of crude oil and also by the exchange rate fluctuation of the Hungarian Forint (HUF) to US Dollar (USD). However the significant fluctuation of fuel prices during the recent years raise the question to what extent it orginiates in the above mentioned factors and to what extent it is influenced by the excessive pricing practice of MOL which might be based on its dominant position. The GVH deemed it necessary to identify these factors in the course of a competition supervision proceeding, therefore it initiated a competition supervision proceeding against MOL on 11 May 2010 since it suspects - based on its obsevations and the information available on the market concerned - that the wholesale fuel prices applied by MOL since 1 January 2006 qualify as excessive, which might have a perceptible impact on fuel retail prices.
The initiation of the competition supervision proceeding does not mean that the undertaking in question has actually committed the infringement. The proceeding targets the clarification of the facts and thus to prove that the infringement assumed has been committed; it also implies the investigation of the fact whether the undertaking is in a dominant position on the market and whether it has abused it. According to the Competition Act such proceedings must be closed within 6 months, however this time limit can be extended two times by further 6 month each, depending on the complexity of the case.
Case number: Vj- 50/2010
Previous MOL cases in Hungary
In the recent past 15 years, the GVH has investigated the market practice of MOL in the course of about twenty competition supervision proceedings the majority of which has concerned the acquisition or outsourcing of some of its business units and subsidiaries. The GVH has conducted against MOL two proceedings for abuse of dominance, one for restrictive agreements and one for infringing the prohibition of unfair manipulation of consumer choice; they were closed without the establishment of the infringement.
The GVH has investigated the pricing practice of MOL two times (case No. Vj-152/2000 and Vj-33/2004). In January 2001, in its decision closing the competition supervision proceeding No. Vj-152/2000 concerning the wholesale pricing practice of MOL, the GVH did not establish excessive pricing as abuse of dominance, although MOL was found to be in a dominant position on the gasoline wholesale market. On 12 October 2004 the GVH once again established the dominance of MOL on the Hungarian gasoline wholesale market in its decision made in the case No. Vj-33/2004, but the prices applied up to 2000 did not qualify as excessive. Based on the experts- calculations, considering the entire investigated period, real wholesale prices were about 8 percent higher in the case of petrol and diesel prices were about 12 percent higher than the cost-based wholesale prices; on the basis of which the GVH did not establish the infringement of excessive pricing.
Among the acquisitions by MOL, the most important cases were - from a competition supervision point of view - the acquisitions of control over Tisza Chemical Group Public Ltd Co (hereinafter TVK, case No. Vj-100/2001) and over Slovnaft a.s. (Vj-158/2002), which were authorised by the GVH. From a market point of view, the acquisition of control over BP Gas Hungary Kft., the gas industry subsidiary of BP in Hungary (Vj-44/1999.), the acquisition of joint control of MOL together with the Republic of Croatia over INA Industrija Nafta d.a (Vj-125/2003.) and the purchase of Shell Romania S.R.L. (Vj-203/2004.) must be highlighted.
The GVH investigated in the case Vj-100/2001 whether MOL had rights to control TVK on a factual basis, and related to this the GVH also dealt with the application of MOL for authorisation of a concentration occurring by acquisition of control over TVK. In its decision made on 7 November 2001, the GVH established that the majority of the management of TVK was made up of the employees of MOL, as a result of which MOL was indeed able to influence the decisions of TVK. Based on all these mentioned, the GVH established that MOL had control over TVK on a factual basis, which resulted in the concentration of the two undertakings mentioned. The GVH also stated that - though a dominant position is neither created nor strengthened on none of the product markets concerned - the property, financial and income situation of the MOL group would get strengthened on the whole, and this might evidently have an impact on each of the product markets. However the GVH deemed that the benefits resulting from the vertical integration were not few at all and exceeded the harmful effects of the concentration; the GVH hereby cleared the concentration.
As an antecedent event of the acquisition of control over Slovnaft a.s., on 1 September 2000, in its proceeding No. Vj-70/2000 the GVH authorised MOL to acquire joint control over Slovnaft a.s. together with Slovintegra a.s. and Slovbena a.s. (S&S) that controlled the acquired undertaking. Within the framework of this transaction, MOL got entitled to acquire 36,2 percent of the shares of Slovnaft by means of capital raising and purchase and sales, and also obtained options to purchase 51 percent of the shares of Slovnaft.
Two years later, by a share purchase agreement concluded with S&S on 23 November 2002, MOL acquired sole control over Slovnaft a.s.; the transaction was cleared by the GVH on 21 January 2003 in its proceeding No. Vj-158/2002. In the course of the proceeding, the GVH deemed that though - considering the findings of the previous competition supervision proceeding No. Vj-152/2000, and the acquisition of TVK by MOL - MOL was still in a dominant position, there had not been any changes resulting from the transaction in the market circumstances that would have indicated the strengthening of the dominant position of the MOL-group. The GVH hereby concluded that in the case of mineral oil products and polyolefin , except for fuel products, the MOL-group did not get into a dominant position even after the concentration, and the concentration did not have any harmful effects on competition on the Hungarian fuel retail market either. Furthermore the GVH found that on the fuel wholesale market the strengthening of MOL-s dominant position was not too significant, and on the other hand changes occurred on the market between 2000 and 2002 unequivocally showed a weakening of the dominant position of the MOL-group; based on all these facts the GVH authorised MOL to acquire sole control over Slovnaft a.s.
For alleged restrictive practices, MOL was once under investigation by the GVH. In its decision made on 16 March 2006, in the competition supervision proceeding No. Vj-163/2005, the GVH did not find that the behaviour of Prímagáz Hungary Industrial and Sales Corporation, Total Hungary Kft., MOL and Shell Gas Hungary Rt. had infringed the Competition Act by trying to exclude Central European Gas Terminal Rt. from the market of PB gas bottles by means of publishing notices in connection with the quality of aluminium gas bottles, excluding the chief executive of the Central European Gas Terminal Rt. from the Hungarian PB Gas Industry Association, and by means of jointly harmonised promotions concerning the change of steel gas bottles.
The GVH conducted a proceeding (Vj-123/1997) against MOL for alleged violation of the prohibition of unfair manipulation of consumer choice; the proceeding was terminated without the finding of an infringement on 29 January 1998.
Proceedings of the European Commission against MOL
In the recent years, the European Commission has also decided in cases in connection with MOL. Most of the cases - similarly to the proceedings of the GVH -have concerned the acquisitions of MOL and that of its competitors or business partners.
Budapest, 12 May 2010
Hungarian Competition Authority
Hungarian Competition Authority
Address: 1054 Budapest, V., Alkotmány u.5.
Postal address: 1245 Budapest, 5. POB. 1036