The Australian Competition and Consumer Commission notes the announcement by Mobil and Shell that the joint venture will not proceed, said Professor Allan Fels, Chairman today.
This ACCC release is intended to place on record the ACCCs position at the time of todays announcement he said.
Mobil Oil Australia Limited and Shell Australia Limited announced on 28 August 1998 a proposal for a refining joint venture. They lodged a submission on 15 September 1998 with the ACCC. They have today announced the joint venture will not proceed.
The proposal was for a joint venture of the refining assets of Mobil and Shell and a new company to be jointly owned by the two petroleum manufacturers.
The ACCC conducted extensive market inquiries and had communications with the parties during October, November and December advising of its concerns about the effect on competition. On 23 October 1998 in particular the Commission advised the parties that its preliminary view was that the proposed joint venture was likely to result in a substantial lessening of competition.
On 7 December 1998, BP and Caltex announced plans for a similar joint venture at the refining level. This added to the Commissions concerns.
At a meeting between Shell, Mobil and the ACCC just before Christmas, Shell and Mobil advised that they would draw up an outline of some undertakings that were intended to overcome the concerns of the Commission. A number of meetings were held about this in January. The Commission did not reach a final position on these undertakings, although it was uncertain whether any undertakings could have resolved the Commissions competition concerns. But this was not resolved.
The ACCC notes Shells comment today that it was confident that the formal authorisation processes would ultimately have led to the joint venture proceeding. The Commission itself is not able to express an opinion on that matter because although the possibility of an authorisation application was apparently being considered by the oil companies, as of today no authorisation application had been made and the Commission had therefore not conducted a full analysis of the possible public benefits of the merger which Shell and Mobil claimed would have resulted from the joint venture. In particular, it had not evaluated possible cost savings.
Regarding the competition issues the Commissions concerns with the proposed joint venture were that it would increase market concentration in refining and thereby lessen competition in a very important element of the process of refining and marketing of petroleum products. There would have been likely flow-on effects to downstream marketing. The Commission was also concerned that imports at 3 per cent of the market only would not represent a significant constraint on the reduced competition. Also, the Commission would have taken into account the fact that with the BP/Caltex joint venture proposal the number of refining operators would have been reduced from four to two with the BP/Caltex joint venture proposal.
The Commission notes that Mobil has indicated that the refining joint venture could not proceed because the approval processes for the Australian joint venture and Exxon-Mobil global merger would overlap.
This ACCC release is intended to place on record the ACCCs position at the time of todays announcement he said.
Mobil Oil Australia Limited and Shell Australia Limited announced on 28 August 1998 a proposal for a refining joint venture. They lodged a submission on 15 September 1998 with the ACCC. They have today announced the joint venture will not proceed.
The proposal was for a joint venture of the refining assets of Mobil and Shell and a new company to be jointly owned by the two petroleum manufacturers.
The ACCC conducted extensive market inquiries and had communications with the parties during October, November and December advising of its concerns about the effect on competition. On 23 October 1998 in particular the Commission advised the parties that its preliminary view was that the proposed joint venture was likely to result in a substantial lessening of competition.
On 7 December 1998, BP and Caltex announced plans for a similar joint venture at the refining level. This added to the Commissions concerns.
At a meeting between Shell, Mobil and the ACCC just before Christmas, Shell and Mobil advised that they would draw up an outline of some undertakings that were intended to overcome the concerns of the Commission. A number of meetings were held about this in January. The Commission did not reach a final position on these undertakings, although it was uncertain whether any undertakings could have resolved the Commissions competition concerns. But this was not resolved.
The ACCC notes Shells comment today that it was confident that the formal authorisation processes would ultimately have led to the joint venture proceeding. The Commission itself is not able to express an opinion on that matter because although the possibility of an authorisation application was apparently being considered by the oil companies, as of today no authorisation application had been made and the Commission had therefore not conducted a full analysis of the possible public benefits of the merger which Shell and Mobil claimed would have resulted from the joint venture. In particular, it had not evaluated possible cost savings.
Regarding the competition issues the Commissions concerns with the proposed joint venture were that it would increase market concentration in refining and thereby lessen competition in a very important element of the process of refining and marketing of petroleum products. There would have been likely flow-on effects to downstream marketing. The Commission was also concerned that imports at 3 per cent of the market only would not represent a significant constraint on the reduced competition. Also, the Commission would have taken into account the fact that with the BP/Caltex joint venture proposal the number of refining operators would have been reduced from four to two with the BP/Caltex joint venture proposal.
The Commission notes that Mobil has indicated that the refining joint venture could not proceed because the approval processes for the Australian joint venture and Exxon-Mobil global merger would overlap.