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AFCA publishes sector inquiry into Austrian fuel market

In light of soaring prices in the fuel market, and the related burden on consumers and businesses, and in response to reports and complaints received, the Austrian Federal Competition Authority (AFCA) launched a market inquiry into the Austrian fuel market pursuant to § 2 para. 1 no. 3 of the Austrian Competition Act (WettbG) on 21 March 2022.

If a sector inquiry does not lead to evidence of cartels or abuse of market power that would stand up in court, the AFCA is not permitted to directly impose conditions relating to business structures or pro-competitive behaviour or to apply to the Cartel Court to have such conditions imposed.

The AFCA may submit facts based on data collected through such inquiries to the Government, Parliament and the general public, allowing them to discuss the matter on the basis of the evidence. No direct evidence of the existence of cartels or the abuse of market power can presently be deduced from the inquiry results. However, there are concrete indications of gross margin hikes at refineries, which will be presented in greater detail below.

AFCA’s approach

To collect up-to-date information, the AFCA sent requests for comprehensive information to all international oil companies operating filling stations in Austria and holding stakes in refineries, namely:

  • OMV AG
  • ENI Austria GmbH
  • Shell Austria GmbH
  • BP Europa SE Zweigniederlassung BP Austria
  • JET Tankstellen Austria GmbH.

At the same time, the AFCA conducted interviews with three of the larger fuel dealers as well as with larger filling station operators that are not invested in refineries. The companies contacted by the AFCA for the purposes of this sector inquiry have all been cooperative.

Before starting its market inquiry, the AFCA also conferred intensively with the Federal Cartel Prosecutor (Federal Ministry of Justice) and subsequently used his input and expertise when drawing up the requests for information.

The AFCA also works closely with the Austrian regulator E-Control in the relevant sectors. On the basis of this good working relationship, E-Control provided relevant data and background information from its fuel price calculator to the AFCA for its market inquiry.

Results of the inquiry

The results of the sector inquiry show that the price rises at filling stations are primarily due to higher international prices. At the same time, since the war in Ukraine broke out, oil companies’ refineries have also been posting markedly higher gross margins (gross refinery margins), and filling stations recorded higher gross margins back in March. The degree to which profits have risen too depends on what has happened to costs, which also appear to have gone up, albeit to a lesser extent:

  • The AFCA has analysed whether the higher prices at the pump can be explained by developments in the price of crude oil. Its calculations show that prices at filling stations are no longer linked to crude oil prices: in the first half of June a litre of diesel was up 36 cents and a litre of petrol up 41 cents compared with the period before the war in Ukraine, while crude oil prices had only risen by around 22 cents per litre.
  • This stronger rise in prices for diesel and petrol at filling stations, which cannot be explained by price hikes in crude oil (decoupling), led to gross refinery margins tripling over the same period of time. The gross refinery margins were up by around 14 cents a litre for diesel and about 20 cents a litre for petrol. Gross refinery margins form the basis of refineries’ profits, subject to the deduction of other moderately increased costs.
  • At filling stations, signs of substantially increased gross margins were only found for March 2022. Gross margins in the subsequent months were only slightly higher than they had been before the war in Ukraine. Other cost components such as higher transport costs and uncertainty in the market need to be considered when evaluating these slightly increased gross margins at filling stations.
  • The results of the inquiry suggest that higher fuel prices are not due to a lack of competition among filling stations but have been caused in particular by the rise in oil prices internationally. For cost cuts to be passed on quickly to consumers in future, fair competition remains important.
  • The issue of prices extends beyond a purely national level. The AFCA is therefore cooperating with the European Commission in this matter.

An example of the impact on consumers:
During the first half of June, consumers were, on average, paying 11 euros more for a 50-litre tank of fuel – diesel or petrol – compared with how much they were paying to fill up before the war in Ukraine, and this was solely due to higher crude oil prices.
Additionally, consumers are paying 9.5 euros more for a tank of diesel and 10.5 euros more for a tank of petrol because of higher gross margins. All of these prices are net of VAT.

Call for comments

The AFCA welcomes comments from affected market participants on the preliminary results of its inquiry, not least due to the significance of the topic for the economy and society as a whole, as well as prevailing geopolitical and economic conditions. Comments may be submitted to the AFCA up to 27 July 2022.

The sector inquiry tool

The AFCA may launch a sector inquiry into a market if it suspects that competition in a specific sector of the economy is being restricted or distorted. It launched this inquiry after having received numerous complaints from market participants.

In accordance with § 11a para. 1 WettbG, the AFCA is authorised to request that undertakings submit information within a reasonable period of time, which is to be set individually. Undertakings are obliged to provide the requested information pursuant to § 11a para. 2 in conjunction with para. 1 nos. 1 and 3 WettbG. The AFCA must – under the conditions stipulated in Article 11a para. 5 WettbG – impose fines on undertakings that intentionally or negligently provide incorrect or misleading information; such fines may amount to up to 0.5% of those undertakings’ total turnover in the preceding business year.

The provision of any information requested pursuant to § 11a para. 3 WettbG may, if necessary, also be ordered by means of an administrative decision in accordance with the General Administrative Procedure Act (AVG). If, contrary to such a decision, undertakings intentionally or negligently fail to provide information, provide incorrect, misleading or incomplete information, or fail to provide information in time, the AFCA must impose fines against those undertakings amounting to up to 1% of their total turnover in the preceding business year.

If a sector inquiry does not lead to evidence of cartels or abuse of market power that would stand up in court, the AFCA is not permitted to directly impose conditions relating to business structures or pro-competitive behaviour or to apply to the Cartel Court to have such conditions imposed.

The AFCA is not allowed to search premises pursuant to § 12 WettbG in the context of a sector inquiry.

Contact: wettbewerb[at]bwb.gv.at