The Icelandic Competition Autority publishes preliminary finding of a market investigation into the fossil fuel market
The Icelandic Competition Authority has published it's preliminary finding of a market investigation into the fossil fuel market. The report contains a detailed examination of circumstances and conduct in the market which are considered to impede competition, to the detriment of the public. The report also discusses what actions may be taken to counteract the circumstances or conduct that harms competition.
The fossil fuel market is extremely important for the Icelandic economy, and it is a matter of concern that the ICA's investigation indicates that competition is severely restricted in an important section of the market. Prices of road fuel (diesel and petrol) in Iceland are higher than in most other western countries, and the difference is so great that it cannot be attributed to the size of the market or to the additional cost of selling fuel in Iceland. In addition, the mark-up of the fuel companies on road fuel is so high that it indicates that there is limited competition. The uneconomical operation of the fuel companies in this field is another indicator of the lack of competition. Mark-ups on fuel sold to companies (major users), however, indicate that there is greater competition in that sector.
Consumer interest
On basis of the preliminary assessment of the ICA it is important to ensure better outcome for customers. According to the results of the investigation, consumers spent far too much on vehicle fuel in 2014, or ISK 4,000–4,500 million, including VAT, i.e. in comparison to prices as would be expected if the circumstances and conduct that harm competition were not evident. Increased competition would release forces that would benefit the society, e.g. through the fuel companies' more economical operation which in turn would lead to lower prices for consumers. To bring this about, efforts must be made to ensure that new competitors are able to enter the market. Overseas experience has shown that independent fuel retailers (e.g. supermarkets) can provide integrated fuel companies with considerable competitive restraints. There are, however, extensive entry barriers to the fuel market in Iceland, a situation that must be changed.
The investigation
The preliminary report is part of a market investigation in which a position is taken on whether and, if so, which circumstances or conduct that harm competition are evident in the fossil fuel market. Through its publication, the Authority requests the opinions of interested parties. The results of the report, therefore, are subject to changes. On having received the opinions, the ICA will make a decision on whether it is necessary to take action against the circumstances or conduct that disrupts competition to the detriment of public interests. The Competition Authority has authorisation for such actions according to item c of the first paragraph of Article 16 of the Competition Act No. 44/2005.
Páll Gunnar Pálsson, Director of the ICA:
The fossil fuel market does not appear to operate as it should and does not provide consumers with acceptable terms and conditions when buying fuel. At this stage of the investigation, there is every indication that action is required to improve the interests of the consumers and to strengthen the Icelandic economy. It is vital that companies in the market, their customers, representatives of consumers and the government submit views and proposals to this end. It would be best if market entities would take the initiative for improvements so as to lessen the necessity of interventions by the competition authorities.
The deadline to submit reasoned views and comments to the report is Friday, 19 February 2016. The submitted comments and views will be published on the website of the Icelandic Competition Authority. As a result, it is important that those who send in their views and comments clearly state what information therein is subject to confidentiality in their opinion.