Cyprus Mail

Fuel companies fined for price fixing

The reduction in fuel consumption tax was part of the state's spending spree

The island’s competition watchdog (CPC) announced Wednesday it has fined fuel companies close to €21m for colluding with their petrol stations in setting the price of petrol and diesel.

The CPC said it has fined Petrolina Holdings, Lukoil, ExxonMobil, and Greek Petroleum €20.7m after it found they had been engaging in price fixing, each company separately with the proprietors of their pumping stations.

The probe covered the period between October 1, 2004 and December 22, 2006. The watchdog said the violations extended until December 3, 2015, since the evidence before it showed no sign the companies had ceased their collusion.

The CPC said the companies’ actions resulted in obstructing, restricting, or distorting competition across the republic.

But by majority vote, the CPC decided that collusion across the sector — between companies — for unified and uniform price fixing could not be substantiated.

It therefore imposed separate fines on the companies depending on their market share. ExxonMobil was fined some €8.6m, Petrolina, €5.7m, Hellenic Petroleum, €5m, and Lukoil, €1.2m.

“The CPC unanimously orders the companies to immediately terminate the violation and avoid repeating such practices or actions that harm the principles of free competition in the future,” a statement said.

The probe had been launched in 2014.

CPC chairwoman Loukia Christodoulou said at the time it aimed at establishing whether possible price fixing included fuel importers, wholesalers, stores, distributors and retail companies.

The watchdog initiated the probe after receiving reports that fuel prices in Cyprus did not decrease in proportion to the oil price decline on international markets.

In 2009 the CPC found that fuel companies were engaging in price collusion and unfair trade practices.

The then chairman Costakis Christoforou slapped a €43m fine on the companies.

However, the probe’s findings – and the fine – never stuck because the corporations took the case to the Supreme Court, where they succeeded in quashing the probe on a technicality: they argued that Christoforou didn’t meet the necessary qualifications to head the CPC.

Consumer groups have long accused the state and fuel companies of complicity in keeping fuel pump prices high, which ostensibly allowed the government to collect more in taxes and greedy corporations to rake in the profits.

In January this year, parliament had threatened to draft a bill forcing fuel importers to immediately disclose the cost of their shipments, thus shedding light on their pricing policy.

MPs were discussing for the umpteenth time what is known in the industry as the “rockets and feathers” phenomenon.

When oil prices rise after being steady for some time, gasoline prices shoot up quickly. In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly.

Quickly rising fuel prices at the pump prompted some lawmakers to cry foul over oil companies raking in super-profits. Some even resurrected the notion that the commerce minister should consider imposing a price ceiling.

The commerce minister is empowered to issue a price cap decree effective for 45 days.

But commerce ministry officials shot down the idea, which has been tried and failed in the past.

For its part, the finance ministry said it had no intention of slashing the consumption tax on fuel (€0.49 per litre) as there were no means to recover the resulting loss in revenues.

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