IN A LANDMARK ruling, the Commission for the Protection of Competition (CPC) said yesterday oil companies had engaged in price-fixing and cartel-like behavior as unsuspecting motorists gassed up at the pump.
The watchdog’s damning verdict found that the four major companies– EKO Hellenic Petroleum, Petrolina, Lukoil, and Exxon Mobil—were all guilty of “concerted practice”, a term denoting an informal and tacit understanding between firms to influence the conduct of the market.
The violations of competition law concern the period from October 2004 to late 2006.
According to the CPC’s statement, released yesterday, the companies were found to be guilty of both horizontal agreement (among themselves) and of vertical agreement (between firms up or down the supply chain from one another).
In short, the “Big 4” not only had an understanding among themselves on pricing policy – in stark violation of competition laws – but also “advised” their respective retailers on the suggested retail price at the pump.
Theoretically, oil companies are now liable to massive fines of up to 10 per cent of their turnover for the period in question, at the discretion of the CPC. Assuming the watchdog does crack the whip, it would easily be the biggest case of action against big business in Cyprus.
“The four companies have, during the time period in question, acted on the basis of a concerted practice, which took the form of indirectly setting retail prices for unleaded 95, unleaded 98 and Low Sulfur diesel,” the CPC statement read.
It added: “Without having reached the stage of concluding a formal agreement, [they] have knowingly substituted practical co-operation for the risks of competition.
“By artificially controlling competition…the businesses sidestep the healthy competition which should normally exist among them, thus artificially setting prices at the expense of the defenceless consumer.
“These types of cooperation…are a deathblow to health competition and…are considered to be some of the more serious violations of the Law,” the statement said.
Oil companies now have 30 days in which to lodge objections and submit remarks to the competition watchdog, after which the CPC will issue its final verdict and determine the magnitude of the monetary fines. The corporations are then allowed 75 days during which they can take legal action, such as challenging the decision with civil courts.
The only reaction yesterday came from Petrolina, with its CEO Dinos Lefkaritis categorically denying any wrongdoing.
“We feel our company did nothing untoward during the period in question,” Lefkaritis told state radio.
He said the company’s lawyers would be studying the CPC’s verdict in order to prepare a response. Lefkaritis did not rule taking recourse to the Supreme Court if the watchdog went ahead and ordered the company to pay the fine.
“We shall take any legal measures necessary,” he said.
Retailers meanwhile washed their hands of blame, and turned the spotlight onto suppliers who control the market.
“When it comes to selling oil, it is the oil companies who have the muscle…it is they who should be called to account,” asserted Pambinos Charalambous, head of the association of petrol station owners.
“The companies always operate from a position of strength, since they both import as well as sell the fuel…they have the upper hand,” he added.
Given the infinitesimal difference in prices charged by different fuel brands, there has long been speculation that the corporations were in cahoots.
Consumer rights activists dug in at the news that big corporations had done wrong.
While welcoming the watchdog’s findings, the Cyprus Consumers Association said the report was not the end of the story as it raised a host of further questions.
Head of the association Petros Markou wondered, for instance, why an advisory panel set up by the Commerce Ministry to monitor market price trends, took no action when it had all the data before it.
“Did they not notice something fishy?” he mused.
And Loucas Aristodemou of the Cyprus Consumers and Quality of Life Association sounded unimpressed with the CPC’s verdict. Any fines that oil companies might pay were a case of too little, too late, he said.
“It has been four years since the investigation began, and in the meantime Cypriot consumers have been sucked dry. If you ask me, it’s a damp squib.”
