TERMINATION OF PROCEEDINGS INITIATED AGAINST MOL RT. BECAUSE OF AN ALLEGEDLY EXCESSIVE PRICING
The Competition Council terminated the proceedings against Magyar Olaj- és Gázipari Rt. (Hungarian Oil and Gas Plc., hereinafter MOL), initiated due to alleged abuse of dominant position. During the competition supervision proceedings the alleged infringement of competition law by the price setting mechanism of petrol and diesel fuel, applied by MOL, had been investigated.
MOL is engaged in the exploration and production of crude oil, natural gas and gas products, in processing, transporting and storing of crude oil, in the transportation, storage, wholesale and retail marketing of crude oil products, as well as in importation, transportation, storage and wholesale trading of natural gas and gas products.
There are no reasonable substitutes for the products that were subjects to the proceedings.
It is only MOL in Hungary that processes crude oil in the refineries at Százhalombatta, Tiszaújváros and Zalaegerszeg; the amount produced was approximately 7 million tons in 1999, including 1.2 million tons of self-produced crude oil, while the rest was covered by import. In March 2000 MOL acquired joint control over Slovnaft, the main activity of which is crude oil refining as well.
As for the wholesale of fuel products, import may serve as an alternative only in the north-western part of the country. Although import is liberalised, petrol is to be transported only in a circle of 200-250 km radius due to economical efficiency considerations. The vast majority of the wholesale is given by MOL.
On the retail marketing level, MOL has a significantly weaker position than on the wholesale market, but still preserves its leading position with a market share three times as high as that of the second Shell.
MOL sets the wholesale prices according to the prices in the world market. MOL takes the 5 day average of the Mediterranean Platt`s CIF MED, increased by the costs of the railway transport as far as the middle of the country and further import related expenses. In general other European oil refineries take into account the average price of Rotterdam, but due to the nearness of the Mediterranean markets, MOL considers the Platt`s CIF MED as reference. The actual wholesale prices could be different because of possible discount made according to the various contractual conditions. The investigation report stated that on the wholesale level MOL has a dominant position, whereas on the retail level, a market leading position. The investigators proposed the termination of proceedings due to the failing infringement of competition rules. During the examined period of 43 months, there was no significant divergence between the actual prices and the self determined maximum price that would justify the infringement.
MOL doubted its own dominant position on the wholesale level, due to the liberalised import.
The Competition Council determined the market of petrol and diesel fuel as the relevant product market, and Hungary as the relevant geographic market, and abandoned the possibility of a wider market definition. According to the Competition Council, in the case of predatory conducts, like the application of excessively high prices the starting point has to be the market share. In cases like this the actual market situation has relevance. MOL had approximately 85-90 per cent market share during the examined period, which substantiates a dominant position. The Competition Council took the view that it is only at extraordinary circumstances that a market share like this does not create a dominant position. MOL does not have to face real competition from any domestic new entrants or regional competitors like OMV and Slovnaft.
The Competition Council stated that on the retail marketing level besides MOL other international undertakings of solid capital are active as well, creating effective competition. Although having a dominant position on the wholesale market, MOL is not able to use it for restricting competition on the retail marketing level.
The special characteristics of oil refining do not allow a cost-based price assessment, so the Competition Council accepted the alternative source of supply as a reference, namely the price of import from the Mediterranean area and the prices of OMV and Slovnaft. Since the prices applied by MOL referred to these prices as well, the Competition Council did not state any infringement.
January 26, 2000. Budapest
dr. Bodócsi András sk. előadó
Vérné dr. Labát Éva sk.
Fógel Jánosné dr. sk.