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Esso and Shell face allegations of ‘predatory pricing’ over fuel cost

The Office of Fair Trading is studying allegations by independent petrol station owners that oil giants Shell and Esso have engaged in “predatory pricing”.

By : 10:30PM GMT 12 Jan 2013

The RMI Petroleum Retailers Association (PRA), representing the independent retailers who run 60pc of UK forecourts, made the claim as it called for all petrol stations to sell fuels at a minimum price to shield its members from going out of business.

The OFT is expected to report within weeks on the state of Britain’s £32bn retail fuel market after calling for evidence in September, amid concerns that the market may be unfair to consumers and to independent retailers.

In a submission to the OFT, seen by The Sunday Telegraph, the PRA claims that independent retailers, which operate as franchisees of the oil majors, are forced to pay wholesale prices that do not allow them to compete effectively with forecourts owned by the oil giants themselves.

It says: “From evidence submitted, certain oil companies, notably Esso and Shell, appear to indulge in localised predatory pricing whereby franchised dealers have to buy their branded fuels at wholesale prices higher than the retail prices on sites owned and operated by the same oil company.”

It claims that independent franchised sites lose custom as a result, threatening their “continued existence”.

In a move that may alarm many motorists who believe that prices at the pump are already too high, the PRA has also called for a minimum pricing system for fuels, linked to wholesale prices.

Brian Madderson, chairman of the PRA, told The Sunday Telegraph that a “retail price floor” for road fuels would “cut out the severe price discounting by supermarkets which distorts the market” and would benefit consumers by “protecting our fragile network of filling stations, especially in rural areas”.

Some 400 forecourts closed in 2011 and the PRA claims that many more of the UK’s 5,500 independent retailers are likely to follow suit in coming years. This could reduce competition and overall forecourt stocks, raising the likelihood of panic buying and fuel shortages, they alleged.

A Shell spokesman said: “Dealers have a number of supply options available to them, from wholesale suppliers through to brands, such as Shell. Competition is fierce and in order to win a dealer’s business we have to offer attractive supply arrangements. It’s not in our interests to price uncompetitively.”

A spokesman for ExxonMobil, the parent company of Esso, said it would “cooperate fully” but that it was “inappropriate” to comment further until it had reviewed the OFT’s report in its entirety.

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