Tribunal upholds liquid fuels competition waiver

Ann Crotty

The Competition Tribunal has upheld the Competition Commission’s decision to allow the SA Petroleum Industry Association (Sapia) and its members to co-operate to the extent needed to ensure the continuity and stability of the supply of liquid fuels to various sectors and geographic regions of the local economy.

This was the first exemption appeal to come before the tribunal and relates to an industry that has received considerable attention from the competition authorities.

Gas2Liquids, a wholesaler that imports petroleum products, appealed the commission’s exemption on a number of grounds, including that it would result in excluding smaller competitors, who were not party to the Sapia agreements, from the industry. Gas2Liquids said this conflicted with the government policy initiatives for the sector.

The appeal by Gas2Liquids followed the commission’s October 2011 decision to grant Sapia and its members an exemption to engage in conduct otherwise prohibited by the Competition Act.

Sapia had applied for the exemption after a recommendation by a task team appointed by the minister of minerals and energy, which concluded that in order to avoid a repeat of the 2005 fuel crisis, the fuel industry needed a co-ordinated approach involving industry discussions relating to issues such as fuel supply lines and production shut-downs.

Sapia was required to apply to the commission for an exemption because a co-ordinated approach represented a contravention of the Competition Act.

It first applied for and was granted an exemption for the period of the World Cup in 2010. It subsequently applied for, and was granted, a further exemption for the period to December 2015.

Gas2Liquids appealed against the second exemption and criticised the process adopted by the commission in coming to its decision.

The tribunal found that the commission had actively investigated the competition issues and that it had imposed conditions on the exemption to limit the ambit of the exemption and to require Sapia to widen its membership.

The tribunal also found that the exemption granted by the commission did not preclude non-parties from becoming parties to the agreement, and that the real problem for smaller players in the industry was not the exemption but the current physical constraints on supply as identified by the task team.

In addition, the tribunal found that the commission was not obliged to consider any industrial policy arguments.

In its ruling, the tribunal stated: “The exempted agreements provided for the regulation of a bottleneck infrastructure. By its very nature this is a scarce resource that had to be rationed among its users by way of them reaching agreement on co-ordinating access.

“The commission’s decision not to make the exemption dependent on it being extended to all players in the industry cannot be faulted.”