20 March 2015

Spanish Government plans to reduce Repsol's market share in the fuel distributors market

The Spanish Parliament is currently debating a draft bill proposed by the Government to amend Act 34/1998 on the hydrocarbon sector, with the objective of increasing competition and transparency, and reducing the retail price of fuel.  It is predicted this will have a positive effect on the economic recovery and generate employment.

The Popular Party, which supports the Government, introduced several amendments in the lower chamber of the Parliament in order to prohibit oil companies from opening new petrol stations or branding existing ones, in those provinces where they have more than 30% market share by sales (in litres).

This is a key difference from the amendments introduced in 2013, which established the number of petrol stations as a criterion to determine market shares, which the party in power justifies as a measure to prevent oil distributors disinvesting in petrol stations with low sales (generally located in rural or small municipalities) and opening in more profitable locations whilst not affecting the market shares based on the number of petrol stations.

According to the now defunct Comisión Nacional de Competencia (CNC), there is an important difference between the two systems of calculation, as oil distributors with a high market share per litres sold may have lower market shares per petrol station unit.

Although the measure is targeted at all market operators, experts consider that Repsol will be the most affected company as according to a report issued by the Spanish regulator (CNC) in 2010, its market share was 45% by litres sold but 38% by number of petrol stations.

This will be the second time Repsol sees its business limited by law in the last few years, as the amendments introduced in 2013 already prevented the company from continuing to grow in 32 out of 52 provinces and autonomous cities.  A report issued by the Spanish watchdog in 2012 estimated the market share of Repsol at 45%, therefore the company will face a strong reduction in its growth prospects.

Other measures proposed by the party in power would oblige operators to share more detailed information with the regulator and more frequently in order to increase the accuracy of statistics, as well as the possibility for non-branded and supermarket petrol stations to inform customers of the origin of the fuel offered.  The rationale behind the latter is to eliminate the possibility of customers thinking that the quality of petrol supplied by supermarkets or non-branded stations could be lower than that supplied by renowned companies.

Finally, retail stations would be allowed to sell fuel to other retailers with the aim of reducing the market shares of the big distributors, who control oil refineries in the upstream market.

The amendments are likely to be passed as a result of the absolute majority of the Popular Party in both chambers of the national parliament.  However, the debate is still open and the principal opposition party, the Socialist Party, has for instance proposed 69 amendments including one to further reduce the market share quota to 25% in order to increase competition in the sector.

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