CN03 - French Competition Authority blocks concentration in the transport of refined products sector
16 June 2021
On 12 May 2021, the French Competition Authority ("FCA") prohibited the acquisition of sole control of the company owning and managing a pipeline network which supplies refined oil products in the south-east of France. It is only the second prohibition decision since the creation of the FCA.
Key takeaways
- In order to prevent any risk of a distortion of competition arising from the implementation of a merger, the FCA may prohibit such a transaction.
- When risks of distortion identified by the FCA go to the very purpose of a contemplated transaction, no structural injunction is capable of addressing competition concerns.
Background
On 14 September 2020, Ardian group, a private equity investment firm, notified the FCA of the proposed purchase of ENI's share capital (5%) in the Société du Pipeline Méditerranée-Rhône (SPMR), which owns and operates a pipeline network supplying refined oil products in south-east France, between the Mediterranean coast and the Geneva region (the Pipeline Méditerranée-Rhône – PMR).
Since Ardian already holds a 47.2% share in SPMR, the contemplated transaction would result in the acquisition by Ardian of sole control of SPMR. Post-transaction, SPMR – and therefore the PMR – would be, for the first time since its creation in 1968, controlled by a single operator (which is currently jointly controlled by all its shareholders, including PMR users i.e. Esso, ENI and Thévenin-Ducrot).
On 8 December 2020, the FCA launched an in-depth investigation to assess the extent to which the proposed transaction could impact the competitive dynamics of the market for the transport of refined oil products in the south of France, as well as on the commercial policy of the PMR, its pricing and the quality of its services, which could be defined by Ardian alone post-transaction.
Prohibition of the Transaction
The FCA considered the PMR to be essential infrastructure for customers, as (i) no reasonable alternative to the services it offered is available (the PMR holding a de facto monopoly), and (ii) given existing regulatory constraints and the level of investment required, it cannot be duplicated by any competitor.
Moreover, in-depth analysis by the FCA confirmed the risks of price increases and degradation of services offered by the PMR.
Finally, the FCA found that although SPRM is subject to control by public authorities, such control is only aimed at ensuring the continuity of supply in refined oil products and not at precluding distortions of competition.
Given the absence of remedies sufficient to outweigh the negative effects of the transaction and the impossibility of granting any injunction, the FCA decided to prohibit the transaction.
According to the FCA press release, in this sector, only an ex ante regulation could eliminate any risk of a distortion of competition. This conclusion is similar to the one expressed in a previous case, in which Pisto finally gave up its plan to acquire sole control of Trapil, a company specialised in the transport of refined products by pipeline in France.
