Question

The Hellenic Competition Commission (HCC) in a previous Decision (No. 418/V/2008) launched a sector inquiry into the oil industry in Greece (e.g refining, wholesaling and retailing market segment) and claimed among others that multinational oil companies (BP Hellas S.A and Shell Hellas S.A) supported their filling stations (branded retailers) when competitors temporarily reduced prices to increase sales, requiring that the discount was passed on to the consumer ("price support" discount scheme). (a) Give an overview of the decision adopted by the HCC focusing solely on the wholesale oil market segment. Briefly describe the two oil companies. IMark: 0.5] (b) Define the relevant product(s) and geographic market(s) for the wholesale oil market segment in Greece. What type of quantitative economic tools are the proper ones to correctly delineate the relevant markets in such a case? [Mark: 0.5] (c) What economic arguments dictated the abolishment of the "price support" discount scheme by the HCC? [Mark: 1.0] (d) Did the competent Ministry adopt this policy measure? Critically discuss what was the impact of the relevant decision to consumers over the period 2009-2018 (i.e evolution of retail prices, consumption and variety of the petroleum products offered by the wholesalers) and how did the oil industry change thereafter in terms of competition Comment on your findings [Mark: 1.5] Hint: This is an essay type question and students are free to express their views provided that they are well grounded on economic analysis ad are logically consistent. Students ar use official sources that can be found online on the Hellenic Competition Commission's website and the answer should be at most two page answer should be at most two pages long.

Answer 1

Answer (a) : BP Hellas S.A and Shell Hellas S.A are primarily Petroleum and Oil Trading companies that act as the middle coordinating trade joint between the oil extractor / producer and the big companies or nations that demand Oil and petroleum. Both these trading companies are involved in the wholesale distribution of the petroleum and oil products. The Hellenic Competition (HCC) had found severe irregularities in the preliminary information and the over initial investigations done on these trading companies, where they were found to be taking away the profit margin which was supposed to be transferred to the consumers, the profit was came out from the overall reduction of prices due to the competition in the trading companies’ market. The regulations which applies in these trading companies strictly advice them to pass on any of such derived profits to the consumers. Therefore , a sectoral enquiry was launched on these two companies.

Answer (b) : The Wholesale Petroleum and oil trading market in Greece has been one of its most profitable sectors. The Geolocation for the extraction of petroleum and oil products also play a very conducive role in the overall market performance of these companies which has been more than satisfactory. Many companies such as the Kapnidis G S.A, Mil Oil Hellas S.S , Alfa Wood Nevrokopi S.A , Gournaris. D S.A any many more have been able to function smoothly and the extraction market has been much profitable to them. The extraction, branding, and wholesale distribution of various petroleum products, lubricants, glycerin’s, bio-diesel, Garden chips of the woods, pallets of the woods, etc. are the main extracted items. The increase in demand for the products being up for sale in these sectors can give us a true idea about the product and its quality in the market.

Answer (c) : The Hellenic Competition Commission had strictly advised these companies to not involve in the distortion, or in any other activity that could result in to the market competition and the prices of the Oil and petroleum products being impacted. Some of its main arguments included that the companies should avoid directly or indirectly trying to fix the prices or the other conditions of trading , they should also not try to control or limit the production, technical changes, or the supply of the products, they should share the market and the available sources of their supply, the tractions which are equivalent in nature must have similar price conditions and pricing norms etc.

Answer (d) : The policy measures indicted by the commission were to some extent being followed by the relevant ministry, however, there have been allegations that the Government has not been positive enough towards the proper and throughout implementation of these guidelines, which if were properly executed and implemented could have changed the oil and petroleum extraction and their distributed market structure. The guidelines pushed by the HCC had severe consequences. Many of the firms involved in the distribution of the oil and petroleum products have had to curtail their business to some extent owing to these guidelines. The Companies found it difficult to exist in the market, as it was observed that their powers were severely cut down. Their profit margins began to fall because they not being able to involve in any such competitive market strategy which could benefit them. Moreover, there was very limited initiative from the Government side to safeguard the business right of these companies. However, after 2018, there has been noticeable change in the functioning style of these oil companies owing to many such steps taken by their conglomerated organization. They have now ensured that they always work under the same set of rules, and they work in such a way that the profit margins of none of them gets negatively impacted and their share of profit is being equally and satisfactorily distributed. Moreover, these companies have also ensured to maintain economic stillness in terms of their policy matters and not forcing it upon the other companies or on to the consumers. They are now also much dedicated towards passing out any available profit margins to the consumers.