Commission Decision

of 9 February 2000

declaring a concentration to be compatible with the common market

(Case No COMP/M.1628 - TotalFina/Elf)

Council Regulation (EEC) No 4064/89

(Notified under document number C(2000) 363)

(Only the French text is authentic)

(Text with EEA relevance)

(2001/402/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings(1), as last amended by Regulation (EC) No 1310/97(2), and in particular Article 8(2) thereof,

Having regard to the Commission Decision of 5 October 1999 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to make known their views on the objections raised by the Commission,

Having regard to the opinion of the Advisory Committee on Concentrations(3),

Whereas:

(1) On 24 August 1999 the European Commission was notified, in accordance with Article 4 of Regulation (EEC) No 4064/89, of a planned merger whereby TotalFina would acquire full control, within the meaning of Article 3(1)(b) of Council Regulation (EEC) No 4064/89, of Elf Aquitaine by way of a public takeover bid announced on 5 July 1999.

I. THE PARTIES TO THE TRANSACTION

(2) TotalFina is a public limited company formed under French law, in business in the production of petroleum and gas, refining, distribution of petroleum products, petrochemicals and speciality chemicals. Its business is worldwide.

(3) Elf Aquitaine is a public limited company formed under French law, in business in the production of petroleum and gas, refining, distribution of petroleum products, petrochemicals, speciality chemicals and health-care. Its business is worldwide.

II. THE CONCENTRATION

(4) The concentration consists of a public take-over bid by TotalFina for all the shares in Elf Aquitaine held by the public. The concentration is accordingly an acquisition of full control within the meaning of Article 3(1)(b) of the Regulation.

III. COMMUNITY DIMENSION

(5) The firms concerned have an aggregate worldwide turnover of more than EUR 5000 million(4) (Total: EUR 34981 million; Elf: EUR 32251 million). Each of them has a turnover in the Community of more than EUR 250 million [...](5), but neither of them generates more than two thirds of its turnover in a single Member State. The transaction accordingly has a Community dimension.

IV. PROCEDURE

(6) On 15 September 1999, TotalFina filed proposals for commitments during the first stage of the procedure under Article 6. The deadline for proceedings was accordingly extended as provided by the Regulation. These commitments were found to be neither adequate nor precise enough to allay all the serious doubts raised by the notified transaction.

(7) On 18 October 1999 TotalFina filed proposals for commitments pursuant to Article 8(2). [...].

(8) These commitments were found to be neither precise enough nor of such a nature as to allay all the serious doubts raised by the notified transaction.

(9) On 17 September 1999 the French authorities filed a request for partial referral pursuant to Article 9 of the Merger Control Regulation. The request concerned certain markets considered to be local markets for finished petroleum products storage facilities, fuel sales via motorway networks and the supply of LPG in canisters to retailers. The Commission referred to the French authorities by decision of 26 November 1999 aspects of the case relating to the provision of hub depot services in the areas around the northern and southern Paris region, Lyon and Port-la-Nouvelle. It has not proven to be necessary to address the treatment of the other concerns listed in the referral request as the Statements of Objections covered more precisely the storage of petroleum products in the regions of Nantes, Saint Nazaire and Havre, motor fuel sales on the motorways and the sale of LPG. The French authorities have withdrawn their request for referral on 3 February 2000 regarding the elements on which the Commission had not yet taken position.

(10) On 26 November 1999 a Statement of Objections was sent to TotalFina, which replied on 13 December 1999. TotamFina did not request the holding of a hearing.

V. DEFINITION OF RELEVANT MARKETS AND COMPETITION ANALYSIS

1. INTRODUCTION: REFINING AND SALE OF REFINED PRODUCTS

1.1. Demand

(11) French petroleum consumption (1997) is 48,5 million m3 per annum for petrol and diesel and 19,5 million m3 per annum for domestic heating oil (DHO) and is rising at the rate of approximately 4,1 % for fuels, 3,5 % for DHO and 5,8 % for LPG products.

1.2. Supply channels and the logistical chain

(12) There are currently 13 refineries in France, the most important of them being regrouped in two "refining centres", one around Étang de Berre (Marseille) and the other in the lower Seine (Normandy), where the largest refineries in France are concentrated. The are also a number of individual refineries in Dunkirk, Donges (Nantes region), Grandpuits (Paris region), Feyzin (Lyon region) and Reichstett (Alsace). Elf and TotalFina each own three refineries (Paris, Lyon and Nantes regions for Elf; Dunkirk, Seine valley and Étang de Berre for TotalFina). Shell, Esso and BP/Mobil have two each, in the Seine valley and Étang de Berre. There is also the refinery at Reichstett in Alsace, owned by Shell (65 %), TotalFina (8 %) and Elf (10 %).

(13) France is a petroleum products importer and has infrastructure capable of importing and storing greater volumes than are currently in stock. Imported products are generally purchased on the North Sea and Mediterranean cargo markets on the basis of quotations such as Platt's. France is a net importer of diesel and a net exporter of petrol.

(14) Imported products are unloaded at import depots. Import depots and refineries are the sources of refined products. These are usually connected to bulk transport facilities (nearly always pipelines but sometimes trains and barges) which make it possible to supply refined products throughout France. Products are then sold from what are known as hub depots; there are smaller than import depots and products are transported form them by lorry to retail outlets (service stations). Import depots and refineries are also used for local supply purposes.

(15) There are four pipeline systems in France.

(16) The Trapil pipeline system (held by the company with the same name) is fed by the four Seine valley refineries and by the Le Havre import depot (controlled by Compagnie Industrielle et Maritime (CIM) and the Rouen import depot (controlled by Compagnie Parisienne des Asphaltes (CPA)). Apart from the Basse Seine itself, it supplies the Paris, Orléans, Tours et Caen regions. Trapil also supplies refined products to the Donges-Melun-Metz (DMM) pipeline, which transports them to the east of France.

(17) The SPMR pipeline is fed by the refineries in the Étang de Berre (Esso, BP/Mobil, Shell and TotalFina), the Feyzin refinery (Elf, Lyon region) and Depot Pétrolier de Fos (DP Fos, an import depot). It links these refineries to the Lyon region, the French Riviera and, through its Alpine branch, Switzerland.

(18) The DMM pipeline is fed by the Donges refinery (Elf), the Donges import depot owned by SFDM (itself controlled by Elf, see recital 134) and the Grandpuits refinery. DMM is connected to Trapil (Levesville and Champeaux), but this connection cannot be used to carry products to the Paris region (the flow of refined products is from West to East). Arrival points are the depots at Le Mans or Saint-Gervais, La Ferté Allais (SFDM), Grandpuits (Elf refinery) and the depots at Châlons-sur-Marne and Saint Baussant (connection with the Common Defence Organisation (ODC) pipeline.

(19) The ODC pipeline belongs to NATO. It is managed by Trapil. The ODC pipelines are little used as their configuration is outdated. It is possible that the part of the pipeline which feeds Strasbourg may be modernised in the run-up to the closure of the Reichstett refinery. To optimise outlets of the Dunkirk and Normandy refineries, TotalFina has invested in upgrading the part linking Dunkirk to Cambrai (pump equipment). The new pumping station is in the TotalFina refinery at Dunkirk (exclusive user rights).

(20) Refined products, after transport by pipeline, or occasionally by barge or train, are stored in what are known as hub depots, from which they are delivered to retailers or final consumers.

(21) "Logistical chain" means the succession of distribution stages from refinery to retailer.

1.3. Sale of refined products by networks and by other channels

(22) To contain shipping costs, most refined products sold in France are taken from French refineries. The rest is exported or imported by large-capacity bulk carriers. Fuels and other finished products produced by a refinery are either brought into the producer's integrated retail network or sold wholesale (wholesale sales) to retailers, dealers or major final customers, or even swapped with other refiners. Wholesalers and retailers prefer to obtain supplies of refined products locally from a depot or a refinery.

(23) In earlier decisions the Commission has defined various markets relating to the supply of refined products at the wholesale and retail stages. In particular it has defined a market for retail sales of fuels (petrol and diesel) in general and on motorways in particular and for retail sales of domestic heating oil. Apart from motorway fuel sales, the transaction would not directly change the competitive situation on the retail market on account of the pressure exerted by supermarkets. Over the years the supermarkets have accumulated a combined market share of around 50 %. TotalFina have a combined market share of [20 % to 30 %].

(24) However, a durable competitive presence on the retail market for refined products in general is heavily dependent on the availability of a logistical supply infrastructure. The supermarkets are thus important competitors for the retail sale of fuels and have sought to gain access to the three stages in the logistical chain (import depots, pipelines and hub depots). They are thus in a position to choose between two options: 1. obtain local deliveries from refiners (who, if necessary, then arrange transport of the product to the hub depots that are closest to their customers' service stations; or 2. obtain the product on the international market (via an import depot) or from a French refinery. In the latter two cases, they arrange for their own transport, either by lorry (if the service stations to be supplied are close to the refinery or import depot), or through the pipelines and local storage in hub depots. If the supermarkets have been able to develop and maintain their presence on the retail fuels market, it is thanks to this choice and the competition between the refiners, in particular the two largest, TotalFina and Elf.

(25) The notified transaction would not only end the rivalry between TotalFina and Elf but would also raise problems of competition at every stage of the logistical chain described above.

2. THE WHOLESALE MARKETS FOR PETROL, DIESEL AND DOMESTIC HEATING OIL

2.1. The reference markets

2.1.1. Product markets

(26) The "wholesale market" means the market for the supply of fuels to retailers (e.g. supermarkets) who are not integrated upstream and to major final users (transport firms). Sellers on the wholesale market include refiners and dealers such as Louis Dreyfus and Cargill. In practice customers can buy the product ex-(hub) depot. All refiners have transit contracts with third parties in most of the depots they own themselves or in which they have holdings. Customers can also buy the product ex-refinery or ex-import depot, either to supply their networks of service stations near these sources (in which case the refinery and/or the import depot will be used as no more than a hub depot) or because they wish to negotiate bulk purchases (e.g. imports by ship) for storage in the import depot. In the latter case access to large-scale transport infrastructure from the import depot or refinery and access to hub depots is vital. What is a issue here is capacity rental or transit; the refiners hire their capacity out on an ordinary contract basis at some of their sites.

(27) The wholesale sale of each of the refined products in question (leaded and unleaded petrol, diesel fuel and domestic heating oil) constitutes a separate relevant market, distinct from the wholesale market for other products. These products are not substitutable for each other in terms of demand. And there is no supply substitutability as that would depend on adjustments at the refineries which in turn depend on many other parameters.

(28) There is no need to distinguish between the two categories of customers to define the relevant markets. If there was a price differential between major final users and customers at the retail and wholesale stages, the latter would take advantage of arbitrage possibilities to supply major final users. The price difference would not be profitable as regards the wholesale market.

(29) Wholesale markets are of vital importance for the maintenance of competition on the retail market, as the competitive capacity of non-integrated retailers depends on their capacity to obtain supplies on the same terms a s integrated retailers.

2.1.2. Geographic market

(30) The geographic market for wholesale sales is heavily dependent on the physical geography of the logistical chain in France. Given the infrastructure constraints on the transport of refined products by pipeline, the wholesale market could appear as being regional. The volumes of final products bought ex-refinery or ex-import depot are commonly either consumed near to these refineries or depots or transported by the seller by pipeline or by other means of transport to hub depots, which supply nearby networks of service stations. Hub depots are thus mainly supply points for a product for which sales are negotiated as to 25 % locally and 75 % regionally or nationally.

(31) The French logistical infrastructure is such that six distinct geographical zones must be distinguished for wholesale markets:

(i) the southern zone (Provence, Midi-Pyrénées), where products are supplied up to 90 % by the SPMR pipeline, itself supplied by the refineries at Berre and by maritime imports at Fos(6);

(ii) the eastern zone, supplied chiefly by the Reichstett refinery and the TotalFina refineries at Mardyck (Dunkirk) via the ODC pipeline and the Elf refinery at Donges via the DMM pipeline, or by barges navigating the Rhine(7);

(iii) the northern zone, supplied chiefly by the TotalFina refinery at Mardyck and the depot at Feluy (Belgium) connected by private pipeline to the TotalFina refinery at Antwerp, and by coastal import depots(8);

(iv) The Normandy zone and the Paris region, supplied chiefly by the lower Seine refineries (TotalFina, Shell, Esso and BP) and different import depots via the Trapil/LHP pipeline, and by the Elf refinery at Grandpuits(9);

(v) the western and central zones, supplied by the Elf refinery at Donges via the DMM pipeline and maritime imports through Atlantic ports(10).

(vi) The Rhône-Burgundy zone supplied by the Elf refinery at Feyzin (Lyon) and by the SPMR pipeline form the Étang de Berre refineries(11).

(32) TotalFina considers the geographical dimension of the wholesale market to be national. It argues that, for one thing, there is a major flow of refined products from one region to another, and besides, there is no noticeable price difference from one zone to the next.

(33) Each supply point, be it a refinery or a depot, is likely to supply a particular hinterland, the radius of which will depend on the cost of transporting the product to the final destination. Several hinterlands can overlap in terms of demand, with an impact of the uniformity of conditions of competition. The geographic markets to be considered for the purposes of competition analysis can cover several intersecting hinterlands.

(34) TotalFina proceeds among other things on the basis of the existence of flows of products between specified regions to explain that the relevant markets cannot be regional. The Reichstett refinery, for example, adjusts its prices in the light of ex-refinery prices at Dunkirk, Donges, Feyzin or Fos, factoring in transporting costs. These flows are due to the existence of pipelines that cross these regions. This does not make it possible to do business on the relevant market, as that presupposes the use of depots. The overlaps between the depots' hinterlands are apparently geographically limited and do not suffice to ground a conclusion that a uniform price increase in a given regional zone would not be profitable on account of substitutable supplies from neighbouring regions. It can be seen from an examination of the geography of the logistics at each of the six regions identified above that there are bunches of depots grouped along the pipelines and concentrated around the major conurbations. The hinterlands of these bunches do not overlap. It appears that the place where supply and demand should be analysed will generally be confined to a regional territory according to the boundaries of the six regions previously defined.

(35) TotalFina also explains that there are only marginal differences between the wholesale prices charged in each of the regions identified. But it must be emphasised that wholesale prices are a combination of Platt's prices (quotation for a cargo load) and costs of transport and storage. The costs are only a fraction of the Platt's price, which explains the low differences between regions. Yet there are two Platt's prices for refined products: a North Sea price and a Mediterranean price. Likewise, TotalFina itself charges internal prices for wholesale sales based on four regions defined by reference to French refining centres.

(36) There is therefore considerable evidence to support the view that the geographic market has a regional dimension. It is, however, not to be excluded that the geographical market could have a national scope. The data gathered by the Commission show that the bulk of sales on the wholesale market are supplied ex-refinery or ex-import depot (75 %). The main players on this market have a national presence. The supermarkets issue national invitations to tender for volumes of refined products to be delivered to specified places. Refiners regularly submit daily tenders to the supermarkets on the basis of prices calculated by reference to Platt's quotations (quotation for refined products on the international market) plus transport costs, depending on the place of delivery, and a margin for the refiner.

(37) The definition of the relevant geographic market can none the less be left open as it does not modify the competitive analysis.

2.1.3. Substantial part of the common market

(38) Each of the six zones identified above, given their geographical dimension and the nature of the relevant products, partly accounted for by imports, constitutes a substantial part of the common market.

2.2. Assessment

2.2.1. Current state of competition

(39) As can be seen from the above description of the six regional zones, TotalFina and Elf occupy symmetrical, complementary positions on the French market. The equilibrium in this relationship has been conducive to rivalry between the two groups which has been the motive force behind competition on French fuels markets.

(40) According to TotalFina, TotalFina and Elf together account for [45 % to 55 %] of the quantities of petrol available on the wholesale market for petrol a market which has traditionally been a net exporter. The combined entity accounts for [45 % to 55 %] of the quantities of diesel available on the wholesale market, a market which has traditionally been a net importer. The table below gives estimated market shares calculated by the Commission on the basis of information gathered in its market survey.

>TABLE>

Source:

Form CO and replies to Commission questionnaires.

(41) On the demand side, one of the features of the wholesale fuels markets is the emergence of the supermarkets in the past fifteen years. But the supermarkets state that they have only a small presence on the retail market for domestic heating oil and LPG. One of the reasons given to the Commission is that Elf and TotalFina have hitherto supplied the supermarkets with only very limited quantities of the two products. On the demand side other independent retailers should also be mentioned; they include Bolloré, Dyneff and Avia (Thévenin-Ducrot and Picoty). Bolloré is present on all the wholesale and retail markets for DHO. Dyneff has a network of service stations in southern France. Avia is a joint logo shared by a number of independent retailers in Europe.

2.2.2. Effects of the merger

(42) TotalFina's plan to acquire Elf threatens every one of the factors that would allow a competitive wholesale market (and therefore a competitive retail market). The merger would enable TotalFina/Elf to control each of the stages in the fuels distribution logistical chain. By eliminating rivalry between the two refiners, it would make the new entity into an unavoidable part of life for all other players on the wholesale market (competitors - refiners or customers - retailers). The combination of this refining position and the decisive presence in the distribution chain would generate bottlenecks that would make it more difficult or more expensive for non-integrated operators such as the supermarkets and the independents to gain access to the product.

Supply

- Control of supply sources

(43) Following the merger TotalFina/Elf would control [45 % to 55 %] of French refining capacity.

Refining capacities in France

>TABLE>

Source:

TotalFina.

(44) TotalFina/Elf would also control [50 % to 60 %] (in capacity terms) of the import depots. This figure underestimates TotalFina real control. It presupposes that the BP-controlled Frontignan depot (with considerable capacity on paper) is a depot exerting real competitive pressure on the market. The Commission's market survey suggests that this depot might not be so viable. The French competition authority has established that Frontignan has a very low throughput rate and is not regarded as competitive. [...]. If Frontignan is factored out, the total capacity controlled by TotalFina/Elf would rise to [55 % to 65 %]. The calculation of these percentages includes the capacities of depots over which TotalFina/Elf would be able to exert total or joint control.

(45) The figures below measure the capacities controlled by TotalFina/Elf in terms of supply sources (refineries and import depots) by region. The percentages indicated here represent TotalFina/Elf's share in each of the supply sources and the total capacities of refineries are given for each region.

>TABLE>

Source:

Form CO.

(46) Of the 20 import depots in France, only seven would be controlled by outsiders - CPA Dunkirk (north), Rouen (Normandy/Paris region), CPA StockBrest (west/centre), Picoty La Pallice (west/centre), Shell Pauillac (west/centre), EPG Ambès (west/centre) and Mobil Frontignan (south).

(47) It must be pointed out, however, that TotalFina/Elf would hold a blocking minority of 38 % in CPA and rights of first refusal over storage capacities. Moreover, Shell Pauillac is a ship unloading and intermediate storage terminal without any lorry loading facilities. Products are sent to DPA Ambès (a depot controlled by TotalFina/Elf) where the lorry loading operations are carried out. EPG Ambès suffers from structural problems (the depot is too small to satisfy demand and badly located). In the Alsace region, the import depots basically perform the function of regional "coastal" or hub depots. Their reception capacity is confined to small barges depend on the fluctuating Rhine trade. The Picoty La Pallice depot is the only one that could exert fully independent competitive pressure on imports of refined products. Recently, however, TotalFina concluded a rental agreement [...] in this depot [...].

(48) Because of environmental rules and regulations, and also of economic constraints, the construction of new import depot is virtually impossible. The extension of an import depot is possible in order to adapt its capacity to the needs of the area. But this does not remedy the problem of the saturation of import depots, the effective capacity of which is dependent on how much use is made of the unloading quay (an import depot is considered to be saturated when its unloading quay used more than 50 % of the time). Consequently, the current situation is likely to remain much the same for the future.

(49) Each of TotalFina/Elf's competitors owns a fairly small proportion of import depots. This is due to their presence as minority shareholders in a number of import depots.

(50) In is reply to the Statement of Objections, TotalFina explains that there would remain, either through the other refiners present in France or through the capacities of the import depots operating independently of the new group, very substantial amounts of products available which would make it possible to cover all the needs of non-network-market customers. This would make the exercise of market power on the part of TotalFina/Elf unprofitable.

(51) The Commission would point out that TotalFina's calculations show three important flaws in the analysis. First of all, the calculations performed by Total overestimate the import capacity of refined products as they are based on an assessment of a theoretical product flow that is beyond the physical limits of those import terminals. The Commission contests that the rotation ratio of those import terminals could reach the theoretical levels (rotation ratio of 10) as indicated by the parties. In fact, most of the import terminals have rotation levels of between [...] times a year (with exception to the terminals of Strasbourg/Mulhouse that have rotation levels close to [...] and as such they could not increase their capacity by more than [...] (in fact, a number of terminals [...] are considered as already close to being saturated). On the basis of this, it can be concluded that the rotation levels cannot reach the theoretical levels on which TotalFina has based its calculations.

(52) Secondly, these are averages for the whole of France and for all products (unleaded 95, unleaded 98, diesel and domestic heating oil) sold on the wholesale markets. The French market is, however, structurally an importing market for diesel and domestic heating oil (together known as distillates). On the other hand, the French market is structurally an exporter of petrol.

(53) Finally, assuming that the market would be regional, it has to be underlined that these figures are merely averages for the whole of the French territory and that the situation is different from one region to another.

(54) Quite apart from the above, it is difficult to see in what way the availability of such import volumes might prevent TotalFina/Elf from acting independently on the market. Even if an import terminal could receive four times the amount of products that at present, the question remains which region that depot could supply. If the terminal is not connected to a pipeline or other means of bulk transport, the region supplied would be limited to a radius of at most 150 km.

(55) After having adjusted the effective capacity figures for the import terminals, the coverage of French demand on the wholesale markets by competing refiners and by independent import depots falls to 50 % to 60 %. Thus, TotalFina/Elf would be an unavoidable source of supply for 40 % to 50 % of the French market, whereas it currently supplies approximately 50 % to 55 %. If TotalFina/Elf were to increase its prices, it would risk losing a fifth of its wholesale sales (the loss of turnover might be offset by an increase in margins), but the rivals not integrated at the retail market level would necessarily see their supply cost increase, which would lead to a more competitive position of the refiners at the retail level.

- Control of the logistical chain

Pipelines

(56) TotalFina/Elf would control the management of three major pipelines serving France (Trapil, DMM and SPMR). It would also be the chief user of the northern ODC pipeline linking the north to the eastern region of France, on which it has its own privately-operated pumping installations and controls access by import depots to this pipeline (Total refinery at Dunkirk). The merged entity would also control the only depot situated in Strasbourg with direct access to the southern ODC pipeline (Mediterranean to Strasbourg)(12)

(57) Control of pipelines makes it possible to indirectly control all the storage facilities fed by the pipelines in terms of both quality of service (quotas, management of priorities, transport of specific products) and confidentiality of business dealings. It also gives access to sensitive information about competitors' business (traffic) on wholesale markets.

(58) The scales of charges for some of these pipelines gives large-scale users a privileged position through bulk discount arrangements. And when a pipeline is saturated, quantities are allocated in the light of past use rates, which merely strengthens the status quo.

(59) TotalFinal explains that its major holdings in the three main French pipelines are not such as to give it market power. Given the rules governing the French pipelines, ownership of capital does not guarantee privileged access. Scales of charges are in the public domain; they are transparent and are not discriminatory. Moreover, their operators are subject to review by Government Commissioners who sit on the boards of the three pipeline companies.

(60) The existence of national rules and regulations to ensure that infrastructure of strategic importance is used in the public interest does not release the Commission from its Community-law obligation to avert he emergence of a dominant position. This is especially true where the rules and regulations apply generally and are not designed to enforce the competition rules.

(61) These considerations apply to the French Government Commissioners's review. Their review is not focused on competition law and does not extend to straight control over prices and quantities. It might thus leave pipeline operators with sufficient margin of manoeeuvre to exercise market power. And potentially anti-competitive decisions taken by the companies managing the pipelines that might affect the wholesale market or the pipeline transport market for refined products are not necessarily taken at board level.

(62) Here, reference can be made to the opinion given by the French Competition Council(13) on the action brought by Trapil against the appointment of SFDM as manager of DMM. The Competition Council took neither the relevant rules and regulations nor the presence of the Government Commissioners as a basis for excluding the risk that a competitive problem might emerge. The Commission considers that it likewise cannot take the mere presence of Government Commissioners as a basis for excluding the risk that a dominant position might be crated or reinforced.

(63) According to third parties consulted by the Commission, the rules and regulations governing the business of pipeline managers do not offer adequate assurances as to the setting of prices and capacity utilisation. In each of the pipeline systems TotalFina/Elf would be at one and the same time the controlling shareholder and by far the largest customer. Some customers say that TotalFinal/Elf could use the pipelines as a business weapon to destabilise their retail business. This destabilisation could easily take the form of a decision to raise prices for wholesale customers without customers being able to oppose them.

Hub depots

(64) Regarding storage logistics, TotalFina/Elf would have significant holdings in most of the French import depots and most of the key depots supplying the country. The merged entity would also control a large proportion of the inland hub depots [45 % to 55 %] and coastal depots [40 % to 50 %].

>TABLE>

(65) The calculation of shares in the capacity of the hub depots controlled by TotalFina/Elf includes the inland hub depots, the coastal depots and the import depots which are not linked to bulk transport facilities. Depots that have no more than a buffer function to regulate the flow of a pipeline, such as the Vienne depots, have been left out of the equation.

(66) In the north, Total, in the course of the TotalFina procedure, undertook to divest itself of its holdings in two depots (DPC St Pol and EP Valenciennes) corresponding to Fina's business in the region. The addition of Elf, which is the remaining shareholder in EP Valenciennes, would cancel out the effects of the remedies accepted by the Commission at the time of the Total/PetroFina case. The new entity would also control the Feluy depot in Belgium, which has a pipeline link to the TotalFina refinery at Antwerp. The result of the Commission's investigation and the information given in the notification show that the parties would control around [70 % to 80 %] of the storage capcities under direct control.

(67) In the geographical subset consisting of Le Havre, the Seine valley and the Paris region, TotalFina and Elf would hold shares in ten depots in the Paris region, where there are fifteen or so. The largest depots are the Fina depot at Nanterre and the Elf Antar depot at Gennevilliers to the north of Paris and the CIM depot at Grigny (controlled by Elf) to the south. The clientele of these depots consists of large supermarkets' own brands and domestic heating oil distributors. The depots have balanced storage capacities for petrol, diesel and heating oil, which means that independent distributors can use multiproduct lorries. There is currently no possibility of hiring space in a depot in which TotalFina/Elf do not have a majority holding. Such depots as do not belong to TotalFina and Elf do not allow third-party access or else they do not have the requisite flexibility as they simply do not have available volume of capacity. The new entity would account for about [35 % to 45 %] of the hub storage capacities under direct control in the Normandy/Paris region.

(68) In the west/centre region (Brittany, Nantes, Tours, Orléans), the new entity would control the Vern depot. This extension of the Donges refinery enables Elf to enjoy heavy influence over the Nantes region and central Brittany. Shipments by sea enable Elf to supply the depots at Brest, La Rochelle and Bordeaux. The Le Mans and Lorient areas are liable to be under a monopoly after the merger. At Orléans, TotalFina/Elf would control one depot (EPS) and have a holding (with Shell and Esso) in a second depot. At Tours, the new entity would enjoy a strong presence in two of the three depots at St Pierre des Corps, the third (CCMP) being saturated. The new entity would control about [45 % to 55 %] of hub storage capacities.

(69) In the south and south-west (Midi-Pyrénées), the new entity would control the majority of hub depots, including two of the three at Toulouse. Depots in the south and south-west are often highly saturated by their shareholders' business (e.g. EPPA Puget sur Argens) or regularly out of stock on account of SPMR's business worries. The new entity would have about [45 % to 55 %] of hub storage capacities under direct control in the southern region.

(70) In the Lyon region, the new entity would control the largest depot in Lyon (EPL). This depot has the advantage of being the only depot with riverside loading facilities accessible to barges from Elf Feyzin. This depot, in which Elf is the major shareholder, is the one that makes the largest capacity available to third parties in the region, with the Saint-Priest depot. If TotalFina were to become the majority shareholder in EPL, it can reasonably be expected that the depot would be far less open, given the policy followed hitherto by TotalFina of closing its depots to third parties. The Saint-Priest depot (CPA), in which TotalFina/Elf would have a significant holding, is the depot facing the greatest demand in the region and can be regarded as saturated despite the extension of its capacity (it has the highest throughput rate in France) in view of the limits on the access and lorry-loading infrastructure. The four depots at Vienne (Shell, Esso, TotalFina and SPMR) are not substitutable for EPL or Saint-Priest as there are no lorry-loading facilities. These depots are in fact SPMR supply terminals. Other depots (such as BP Clermont) are too small to meet rising demand or else deal only with a single product, so that independent distributors cannot use multiproduct lorries to supply their sales outlets. Given its position in EPL (the only depot having any sizeable capacity that has capacity available), TotalFina/Elf could be able to capture the future growth of the wholesale market in Lyon, [...]. The new entity would have about [35 % to 45 %] of hub storage capacities under direct control in the Rhône/Burgundy region.

(71) In the Strasbourg region, the combined entity would control one of the three import depots (GPS) and have holdings in one of the other two (SES). A bottleneck already exists in the form of the SES connection to the ODC pipeline, which is possible only via the GPS depot, controlled by TotalFina/Elf. The new entity would control [45 % to 55 %] of storage capacity in the eastern region.

(72) With one or two exceptions, it is a feature of the oil industry in France that there are few logistical facilities that are not controlled by integrated oil firms (and new depots are unlikely to be built in the future on account of environmental constraints and urban sprawl, which are more likely to prompt the closure of existing facilities, notably in the Paris region).

(73) Unlike in other Community countries (such as Germany and the United Kingdom), specialised storage companies are rare in France. Operators such as Oiltanking or Van Ommeren-Pakhoed, for example, have only modest market shares. VTG has already withdrawn from the market. The only storage company expanding for the moment is CPA; after the merger 38,8 % of its capital would be under the control of TotalFina/Elf, which would thus have the power to restrict any further development. [...] CPA thus has limited room for manoeuvre.

(74) To sum up, TotalFina/Elf would have substantial control over imports and transport and consequently over the availability of refined products throughout France.

- Competing refiners would also be logistically dependent on TotalFina/Elf

(75) The market positions of the firms concerned(14) post-merger would be as follows, based on their distribution throughout the six regions identified above:

Position - non-network sales by product and region

>TABLE>

Source:

replies to Commission questionnaire.

(76) Competing refiners would not have the potential to benefit from shifts in demand in response to price rises on the wholesale market initiated by TotalFina/Elf. They do not own sufficient hub depots to supply the whole country. Moreover, to distribute their production, they have to use the Trapil, DMM and SPMR pipelines, which would be controlled by TotalFina/Elf.

(77) TotalFina has drawn the Commission's attention to the fact that the proportion of products obtained from its competitors' refineries in France and sold on the retail market by the same competitors is higher than the proportion of products refined by TotalFina and Elf for their own networks of service stations. The other refiners mainly reserve the limited number of depots that they control for their own use; these depots have only limited capacities that can be made available to other users.

(78) The competing refiners state that, if TotalFina/Elf raised its prices, they could supply additional volumes in certain regions where they have excess resources, notably as from the lower Seine and Berre/Marseille regions. Elsewhere, they are short of one or more categories of product (petrol and distillates) and cannot therefore offer resources unless they buy from competing refiners or on the cargo market (in north-western Europe and the Mediterranean).

(79) The capacity to import additional volumes depends on infrastructure for receiving deliveries, and on this point the competing refiners state that storage capacities would be lower except in the depots where they operate together with TotalFina and Elf. Since the competing refiners have only minority holdings, they are by no means sure of access to additional capacities. Given that Exxon, for example, jointly owns 23 of its 25 depots in France with TotalFina and Elf, Exxon's response might be different it TotalFina and Elf decided on a large-scale rationalisation.

(80) TotalFina explains that it spearheaded the movement to open up logistical capacities to non-refiner retailers. Even accepting that this is the case, the ending of the rivalry between TotalFina and Elf will remove all incentives to keep logistical systems open. In many cases, depots are jointly owned by several refiners ("common" depots), including TotalFina and/or Elf, whose approval is therefore required if access is to be opened up to outsiders. As long as the two operators are in competition with each other, it is in their interests to agree to give outsiders (particularly the supermarkets) access to the depots that they both share with other refiners. If access to a depot in which TotalFina has a holding is refused, a supermarket can turn to a competing Elf depot, so that in any event it can supply its network of service stations. This incentive would disappear if TotalFina/Elf were not faced with sufficiently substantial competition from other depots. TotalFina and Elf are the only operators with an aggregate surplus capacity in the storage networks. In any event, the depots controlled by TotalFina are not very open to third parties.

(81) In its reply to the Statement of Objections. Elf states that the Commission has not taken account of the degree of openness of the import depots held by competing refiners. Although these refiners have transit agreements with third parties in the majority of their depots, what is involved here in most cases is capacity rented to the companies buying their product and this does not have any impact on the degree of competition in the wholesale market.

(82) Opening depots is a meaningful exercise only if the pipelines that supply them are also accessible at market conditions, which would not necessarily be the case since TotalFina/Elf would control all these pipelines after the merger.

(83) It follows that competing refiners' interests would not be served by sparking off a confrontation with TotalFina/Elf by not following price rises. They might well tend to follow the same policy as TotalFina/Elf regarding price rises on the wholesale market and the exclusion of non-integrated retailers.

- Conclusion: An unavoidable part of life

(84) The TotalFina/Elf refineries would be located in each of the six major regions identified and would enable the new entity to deliver throughout France using its own means.

(85) Competing refiners, on the other hand, do not operate nationally, BP/Mobil, Esso and Shell have refineries only in the Seine valley and the Étang de Berre. The analysis shows that swaps with the other integrated oil firms, first and foremost among them TotalFina and Elf, account for about [...] of their supplies, with a higher percentage in the northern region [...]. The Elf refinery at Donges (near Nantes) which is the only refining centre between the south of the Seine valley and the Spanish border, supplies a substantial share of the networks of service stations of the other refiners in this vast region. If BP/Mobil, Esso and Shell wished to continue supplying their networks throughout France, they would inevitably have to look to TotalFina/Elf either to import refined products, to transport them or to obtain them from the refineries.

(86) Moreover, TotalFina/Elf, being self-sufficient throughout the country, would be able to end its swap agreements with other refiners or impose its own terms. This kind of disequilibrium between refiners, only one of whom has (in addition to a strong position regarding import depots) production centres throughout the country, is likely to seriously affect competition in an industry where, because of transport costs and the uniformity of the product, swaps between producers are a widespread practice. The effect of this situation could be a substantial increase in TotalFina/Elf's share of the wholesale market.

(87) What is more, if TotalFina/Elf engaged in less swaps, that would increase the other refiners' available capacities in certain regions. But the competing refiners have logistics that closely match their needs and as such, generally do not have logistic capacities to sell in France. Conversely, TotalFina/Elf, given its nationwide logistical facilities, would be capable of selling the products it previously swapped with other refiners in regions where the new entity was no longer seeking swaps, notably along the southern Atlantic seaboard or in the western part of the Mediterranean.

(88) TotalFina has explained that ending its swap agreements with other refiners operating in France would expose it to the risk of reprisals in other Member States. But it must be noted that TotalFina/Elf would be the leading European refiner, with refineries in the United Kingdom, Germany, the Netherlands, Belgium and Spain. No other refiner would be able to exert pressure on TotalFina/Elf in the other countries, being nowhere in a sufficiently dominant position. Neither Exxon/Mobil, nor BP, nor Shell hold a predominant position in a national market as this will be the case for TotalFina/Elf in France. These refiners will, as such, not have the necessary market power that would allow retaliatory action on TotalFina/Elf. Only a common behaviour against TotalFina/Elf could be efficient, although this is very unlikely as the interests and market positions held in the other Member States vary considerably. Moreover, given that some refiners present in Europe are not present in France (e.g. Texaco, Conoco and Philips), the new entity TotalFina/Elf is assured of being able to obtain supplies in Europe irrespective of how it conducts itself in France.

(89) On the retail market, the other refiners have interests that broadly coincide with those of TotalFina/Elf vis-à-vis the supermarkets. The supermarkets exert strong competitive pressure on the refiners by having lower costs. Price alignment by the other refiners as a response to a price increase initiated by TotalFina/Elf could not be counterbalanced by imports as a fall back position and would lead to increased profits for all refiners on both markets.

(90) The vulnerability of the other refiners, their retaliatory capability outside France and the existence of convergent interests to increase margins in both the retail and wholesale market imply that the most rational behaviour for the competitor refiners would be to follow TotalFina/Elf.

- Demand analysis: Insufficient demand-side constraints

(91) It follows from the foregoing that in the event of a decision by TotalFina/Elf to raise prices, it would be in the interests of the other refiners to follow suit. The competing refiners are better protected than the retail competitors - the supermarkets for fuels and the independents for DHO - against abuse of TotalFina/Elf's strong market position (for example where wholesale prices for refined products are raised) because of their vertical integration. An increase in wholesale prices would have limited impact on their costs whereas it would raise costs for non-integrated competitors. Non-integrated retailers have only partial access to the logistical chain. Some of them have holdings in depots (e.g. Carfuel and Distriservice) and some do not (e.g. Siplec and Petrovex). But even those who do have holdings in depots have them only in certain regions, and most commonly in depots where TotalFina/Elf retains control.

(92) The question remains whether the purchasing power of independent retailers in particular (supermarkets, etc.) might impede price rises. For this to be the case, the independents would have to call on imports, either directly by buying on the cargo market or through international traders. However, the supermarkets are only partly integrated in the logistical chain. They do not have sufficient storage capacity at import depots and they have no holdings in the pipelines to ensure that they can distribute their production.

(93) The supermarkets are both customers and competitors of the refiners. In 1998 they obtained [...] of their supplies from refining companies, the balance being covered mainly by international traders (Cargill, Dreyfus Energie, MVW, Société Générale Energie, Lagerhauser, Bolloré, etc.). TotalFina/Elf would be in a position to limit the international traders' access to the infrastructures which it controls.

(94) As has been seen, only the Picoty La Pallice depot is currently immune from TotalFina/Elf influence. But this depot has a capacity of 213500 M3 which is already in use. Even at a theoretical throughput rate of 10, the volumes imported would not suffice to make a wholesale price rise by TotalFina/Elf unprofitable, especially as the depot is capable of supplying imported products to only a small part of the west/centre region and to none of the five other regions.

(95) Even supposing that CPA might be free to manage its import depots as it sees fit, it is hardly likely that a TotalFina/Elf price rise in any one of the six regions identified could be made unprofitable by recourse to imports. In northern region, for instance, TotalFina/Elf could easily make CPA Dunkirk financially vulnerable by offering DPC St Pol particularly good terms [...]. In the Normandy-Paris region depot, a similar strategy could be applied to the CPA Rouen depot. In the west/centre region, the CPA StockBrest depot is isolated and can supply only a limited part of Brittany. The Picoty La Pallice depot also serves a limited hinterland. In the southern region, the Frontignan depot is the only one not controlled by TotalFina/Elf. TotalFina/Elf could easily pose a terminal threat to the already precarious survival of Frontignan by [...] or by attracting its customers to the depots at Sète or Port-la-Nouvelle.

(96) It is clear, then, that TotalFina/Elf would have the capacity to oust the competing import depots or at least to contain their competitive pressure. The combined entity could then raise its charges for transit via the import depots under its control with a strong likelihood that its competitors would follow suit. This would reduce the potential competitive pressure of imports on possible wholesale price rises.

(97) The table below illustrates the power that TotalFina/Elf would have over wholesale prices. Even supposing the other refiners operating in France could boost their sales in response to a TotalFina/Elf price rise, imports of at least 5 million tonnes would be needed to balance French supply and demand while maintaining TotalFina/Elf sales at their present level. This would be equivalent to a throughput rate of 5 to 6 or so at the import depots mentioned in recital 93. But as the CPA Rouen depot is the only one with a pipeline link, it is unlikely that these depots would be immediately able to increase their throughput. And competing refiners are unlikely to have the independent logistical capacity to sell their production in France so that, they would enjoy the benefit of a price rise not only on the wholesale market but also in their retail business, which would become more competitive.

>TABLE>

Source:

Commission calculations on the basis of information in the form CO.

(98) It is therefore unlikely that retailers would be able to oppose a price rise. Each supermarket would therefore pass the price rise on to the consumer. Since the current differential exceeds [...] French centimes, which is more than [...] of the network price (before tax), the final retail price invoiced by retailers would remain below the refiners' price.

(99) [...]

(100) TotalFina states that the merger would not place wholesale customers, including supermarkets, in a position of dependence in view of the opportunities for arbitrage available to them and the strong positions they hold on the retail market. According to TotalFina, in 1998 supermarkets accounted for [...] of its wholesale sales, all products combined, and [...] of its sales of petrol.

(101) Whilst it is true that demand is concentrated and sophisticated, this would not make it any easier for the demand side to avoid having to obtain supplies from TotalFina/Elf. The supermarkets have been able to formulate an independent procurement policy (in 1998 they obtained [...] of their requirements from international traders)(15) using the logistical tools available. Holding control over the logistical chain could allow on the wholesale level to punish selectively those supermarkets or other retail players that would not be willing to follow a price increase at the retail sales level.

2.3. Conclusion

(102) Post merger, TotalFina/Elf would obtain mastery of a major proportion of supply sources and the logistical chain (imports, transport and hub depots) for refined products in France. TotalFina/Elf would then be in a position to raise the prices invoiced to buyers on the wholesale markets for petrol, diesel and domestic heating oil either throughout France or in any of the six regions identified without fearing that the competition or customers would be able to make such price rises unprofitable. The notified transaction would accordingly result in a dominant position for TotalFina/Elf on the wholesale markets for petrol, diesel and domestic heating oil having the effect of substantially hindering competition on these markets.

3. THE MARKET FOR THE PROVISION OF STORAGE CAPACITY IN IMPORT DEPORTS LINKED TO MEANS OF BULK TRANSPORT

3.1. The reference market

3.1.1. Product market

(103) Import depots may be defined as those capable of accommodating large-capacity ships (between 30000 and 50000 tonnes). They can store all types of petroleum product and the largest ones are connected to at least two means of bulk transport. They may perform the same role as coastal depots and hub depots when it comes to supplying nearby service stations, but this is the case only with those import depots which are not linked to any means of bulk transport.

(104) Demand exists for the supply of import storage capacity connected to means of bulk transport. This demand emanates from operators located somewhere served by the means of bulk transport linked to the import depot.

(105) In France there are eight import depots linked to means of bulk transport(16), namely:

>TABLE>

(106) If the charges for services related to the provision of import storage capacity linked to means of bulk transport were to be increased for all import depots, the only option open to the demand side would be to turn to the coastal depots or to the large-capacity import depots without access to means of bulk transport. But lack of access to means of bulk transport physically limits the functional substitutability of the depots with import storage capacity linked to means of bulk transport. And the coastal depots are not suited to accommodating large-capacity vessels, so their supply costs are higher. The market survey revealed that transport rates are 35 % higher for 10000 tonne barges than for large-capacity vessels of 30000 tonnes or more. Not only would the capacity offered by the coastal depots be more expensive, but it would not provide any means of bulk transport downstream.

(107) Hence there is no economically viable substitute for the import depots connected to means of bulk transport when it comes to providing services related to the provision of import storage capacity.

3.1.2. Geographic market

(108) As indicated above (see recital 21 et seq.), France's logistical infrastructure is based on the refineries and import depots. These sources of refined products serve to supply various French regions through five pipelines and, marginally, by train. Demand for services related to the provision of import storage capacity may emanate from various regions for each of the depots in question. The import depots on the Atlantic seabord and on the Channel coast are linked to the west/centre, north, Normandy/Paris region and east regions. Parts of the west/centre and east regions may be supplied both by DMM and by Trapil. Similarly, the east region may be supplied by Trapil, ODC-North and DMM. These different possibilities mean that, on the demand side, a choice can probably be made between these import depots linked to means of bulk transport. Only the import depots on the Mediterranean seabord such as DP Fos meet a localised demand without there really being any directly substitutable depots. DP Fos thus supplies the south and Rhône/Burgundy regions. Hence two geographic markets corresponding to the northern half and the southern half of France may be defined. The geographical market definition can be left open, as it does not affect the competitive analysis.

3.1.3. Substantial part

(109) The geographic markets so defined (a northern zone and a southern zone or a national market) each constitute a substantial part of the common market owing to their geographical extent, their population and the role of imports in trade in refined products between France and the other Member States.

3.2. Assessment

(110) [...], exercising control over its own logistics is, for an operator, "indispensable if it is to control operations in terms of quality, security of supply, commercial flexibility and speed of reaction to crises". The Commission has calculated the size of the shares of capacity on the basis of the nature of the control (sole or joint) exercised by TotalFina/Elf over the companies owning the depots. The capacities blocked by their being leased to Sagess have not been deducted from the operational capacities. According to the calculation, even including Frontignan, TotalFina/Elf would control [50 % to 60 %] of all import storage capacities either solely [40 % to 50 %] or jointly [0 % to 10 %].

(111) At the regional level, the merger would bring about the following situation:

>TABLE>

(112) TotalFina has indicated that the new group would not be in a position to act independently with regard to the allocation of storage capacity for imported refined products, as more than half of these infrastructures would remain under the, at least partial, control of operators independent of the new group having sufficient market supply capacities to satisfy demand.

(113) In the case of joint control over depots by TotalFina/Elf in conjunction with one or more third parties, the question raised by the notifying party is whether these depots would run counter to a strategy of exercise of market power on the part of TotalFina/Elf. This is unlikely, given the ensuing situation of deadlock in the governing bodies of these structures. If the third party shareholders would be refiners, their interests would be aligned with those of TotalFina/Elf in order to foreclose access to the terminals for the non-refiners. In case the third party shareholders are not refiners, they would be much more affected than TotalFina/Elf (which has many activities) by a blocking situation.

(114) Even if the storage capacities held by competing refiners are not at present being used optimally, those refiners will tend to maintain a volume of strategic storage capacity in order to offset any production capacity losses (both temporary and structural)(17), to permit exports where they have surplus local production capacity or distribution towards the interior of France, or to import the product into regions where production capacity cannot satisfy demand. Lastly, even if there were sufficient storage capacity to meet additional demand for petrol, the storage capacities for domestic heating oil and diesel are significantly smaller.

(115) In what concerns the southern region, the functioning of DP Fos will be seriously altered. The shareholders of this terminal are: TotalFina (25,7 %), Elf (25,7 %), the independent storage supplier Vopak (21,3 %), the Italian refiner Agip (13,8 %) and the independent retailer Thévenin-Ducrot (7,7 %). The shares held in the capital give access to a proportional volume of storage capacity. If one would want to rent part of this storage capacity, the commercial management of renting this volume has to be entrusted to the operator of the terminal. Pre-merger, each shareholder had an interest in putting these unused capacities in a pool managed by the operator. Post-merger, TotalFina/Elf will be both the most important shareholder and the operator. As such, TotalFina/Elf will be in a position to control the capacities made available by third parties. Through the notified transaction, TotalFina/Elf would gain control of the DP Fos import depot, which faces marginal competition in regard to import storage in the south and the Rhône/Burgundy region. This competition would be from the depots at Frontignan and Port-la-Nouvelle, which, despite having substantial capacity, are able to supply only locally for want of means of bulk transport. As stated above, the attractiveness of Frontignan was called into question by the market survey.

(116) As far as the northern half of France is concerned, the only competition to TotalFina/Elf in this market for services related to the provision of import storage capacity linked to means of bulk transport would be from the independent wholesaler CPA (depots at Dunkirk, Rouen and Brest). As stated earlier, the new entity would hold a blocking minority in CPA.

(117) The same arguments as those put forward in the preceding paragraphs lead to the conclusion that the transaction will lead to the creation of a dominant position held by TotalFina/Elf in the above described market.

3.3. Conclusion

(118) TotalFina/Elf would therefore be able to corner the logistical tools for storing imported refined products and to make it more difficult and more costly for independent operators to gain access to the markets for the distribution of refined petroleum products. The notified transaction would lead to the creation of a dominant position on the markets for the supply of import storage capacity connected to means of bulk transport.

4. THE MARKET FOR SERVICES RELATED TO THE TRANSPORT OF REFINED PRODUCTS BY PIPELINE

4.1. The reference market

4.1.1. Product market

(119) Pipelines transporting finished petroleum products (petrol, diesel and domestic heating oil) are logistical tools used for the collection and distribution of refined products by different petroleum operators, namely refiners, independents and supermarket chains. Independent pipelines systems are, like oil depots, a prerequisite for the maintenance of a competitive environment in the market for the distribution of fuels.

(120) The main pipeline systems are as follows:

>TABLE>

(121) The business of transporting finished petroleum products is generally done "in-house" by most refiners, it being they who transport the finished products from the import depot or from the refinery to their own storage infrastructures. Historically(18), refiners have always collectively held the majority of shares in the companies which operate the pipelines. These same refiners are also the main users, and hence the main customers, of the pipeline operators. However, access to the pipelines may also be open to customers who are neither refiners nor necessarily shareholders in the pipeline operating companies, such as supermarkets. There is therefore a market for services related to the transport of refined products by pipeline.

(122) Apart form pipelines, barges and rail may be used to transport finished products over large distances. Pipeline use ranks first with 72 % of all volumes transported within France, followed by rail at 15 % and barges at 13 %.

(123) The pipeline is the cheapest means of transport. Other means of transport have almost disappeared in regions served by pipelines. Where there is no pipeline, rail use predominates. However, rail is used only if there are specific loading facilities, and framework agreements must first be concluded with the SNCF. Once any discounts have been deducted, these agreements make it possible to arrive at a transport cost which matches the cost of using a pipeline. In practice, instances of such agreements being concluded are rare, one such being, however, that reached with the DP Fos import depot, from which the Toulouse and Dijon depots are supplied by rail.

(124) Rail costs more, however, on average [...], there is more uncertainty surrounding the scheduling and duration of the transport operation, and the infrastructure and loading/unloading costs are such that transport by rail is less practical than transport by pipeline. It is noteworthy that it has developed in order to supply two regions where there is either no pipeline (Toulouse) or where the SPMR pipeline is saturated and the ODC one is substandard (Dijon). It would appear, therefore, that rail must be excluded form the relevant market.

(125) Transport by lorry, apart form being much more expensive, is usable only over distances of between 30 km and 50 km in densely populated areas and 150 km elsewhere. It is therefore not substitutable with transport by pipeline.

(126) The table below shows the cost of transport according to the means used (less handling costs):

>TABLE>

(127) These price differences must be assessed bearing in mind the extreme sensitivity to price variations of demand for fuel at the wholesale level. A price increase of just 1 % on average can lead to customer losses.

4.1.2. Geographic market

(128) For reasons similar to those set out above with respect to the market for the provision of storage capacity in import depots linked to means of bulk transport, the geographic market may be divided into two zones. The first covers the northern half of France and is supplied by Trapil, DMM and ODC, and the second covers the southern half (including the Rhône corridor) and is supplied by SPMR and marginally by the ODC South.

4.2. Assessment

4.2.1. Functioning of the pipelines and the current competition

- The commercial functioning of the pipelines

(129) The tariffs, flow rate, the flexibility of the batches, the frequency of the exploitation cycles and procedures are similar for all three major pipleines (DMM, Trapil and SPMR).

(130) The participation held in the three major pipelines are of a financial nature rather than giving (quota) rights to transport volumes. However, they give priority rights for the transport of petroleum product volumes in case of quota restrictions, as these restrictions are calculated on the basis of the volumes one has transported during the past three years.

(131) In what concerns the access to the pipelines, there is no discrimination between shareholders and third parties. However, in what concerns the Trapil system, third parties have the tendency to rely on their suppliers for transporting the whole of their product volumes as Trapil applies a rebate per tranche of volume transported [...]. The average rebate of a refiner was situated in 1998 around [...]. There are no rebates on volumes transported by PMR or DMM. Trapil, SPMR and DMM each base their tariffs on the basis of volumes of transport in tonnes, and on the basis of the distances covered. To this basis tariff, surcharges are added for fuels [...].

- Competition between pipelines and within the pipeline

(132) On the above markets, competition is conducted at two levels. First of all, pipelines are competing against each other (for instance DMM against Trapil). Secondly, competition may take place on the level of the pipeline itself. Refiners are re-sellers of transport services by pipelines, competing against each other and against the company that operates the pipeline. However, where the pipeline is controlled by any one of them, and is largely used for the transportation of products delivered by shareholders, the there is a strong incentive for aligning the pipeline company's interests on those of the refiners.

4.2.2. The effects of the concentration in the market for the provision of services for transporting petroleum products per pipeline in Northern France

- Effects on the competition within pipelines

Trapil

(133) Trapil is majority-owned by the refiners operating in the lower Seine region. A number of non-integrated operators have expressed the view that the pipeline's operation now primarily meets the needs of these refiners, who have a community of interests. However, it should be noted that in the pre-merger situation, majorities could form around the two main shareholders, TotalFina and Elf. Moreover, with Elf not being established as a refiner in the lower Seine region, its incentives and behaviour might differ from those of the lower Seine refiners. Post-merger, TotalFina would control Trapil and as such the day-to-day management of the pipelines. The lower Seine refiners would become practically the only shareholders in Trapil, with the TotalFina/Elf group as leader, who, in addition, would control the CIM import terminal and the most important refinery feeding into the Trapil pipeline. For the other refiners, the incentive to collude would therefore increase.

- Effects on the competition between pipelines

DMM

(134) Elf holds 49 % of SFDM, the company that manages the DMM pipeline (Compagnie Nationale de Navigation: 31 %, Bolloré Energie: 10 %, Port Autonome de Saint-Nazaire: 10 %) and is entitled to appoint four of the eight members of the Board of Directors. The Chairman of the Board is de jure a representative of Elf and has a casting vote. The pipeline is fed mainly by Elf refineries (Donges and Grandpuits) and Elf is by far its biggest customer. Elf therefore controls SFDM. [...]. Transit requests from non-shareholding third parties are apparently dealt with directly by SFDM's general and sales managers. [...].

(135) The DMM pipeline is of strategic importance to Elf; the route it takes follows an imaginary line between the Elf refineries at Donges and Grandpuits and the Elf-Atochem petrochemicals complex at Carling in Lorraine. DMM enables Elft to sell within France a significant part of the surplus production of its Donges refinery and hence to reduce its exports.

ODC

(136) ODC is managed by Trapil. The ODC pipelines are little used owing to their outdated configuration. To optimise outlets of the Dunkirk refinery, TotalFina has invested in upgrading the part linking Dunkirk to Cambrai (pump equipment). [...]. For these reasons, TotalFina will have a decisive influence that will be further enhanced by the transaction on the ODC-North.

(137) TotalFina/Elf would hold 61 % of the capital of Trapil and would control or would have a determining influence on the two pipelines that could function as imperfect substitutes for Trapil (DMM for Orléans, Tours, south of the Paris region and the east of France, ODC-North for the east of France).

(138) As to the Paris region, all the distribution depots are currently supplied by Trapil, apart from the terminal at La Ferté Alais, which is supplied by DMM. Nevertheless, the DMM pipeline is a potential competitor of the LHP/Trapil pipeline. The DMM's charges, throughput, batch flexibility, operating cycle frequency and operating procedures are similar to Trapil's.

(139) The products transported by DMM also compete with ODC. They go down the northern ODC pipeline from Dunkirk as far as the SFDM depot at Châlons-sur-Marne, then they continue on to Langres before going up to the Strasbourg depots. The pipeline does not yet use its nominal capacity of 5 million m3 (1998 traffic: 3,4 million m3), which could be increased readily to 7 million m3.

(140) DMM may be used to exert competitive pressure on Trapil. [...].

(141) In a similar vein, the Competition Council, seised by the Ministry for Economic and Financial Affairs, delivered an opinion on 28 September 1993 in which it took the view that, if Trapil's bid to run DMM were to be accepted, this would lead to a strengthening of the dominant position already held by Trapil in the transport of refined products by pipeline to the Paris region.

(142) The new group TotalFina/Elf would account for more than [...] of the DMM pipeline's traffic (by volume) and would own [...] of the refining capacity linked by DMM and Trapil to the Paris region. Competition would be considerably weakened as a necessary consequence of one of SFDM's shareholders being a refinery which controlled and was the main supplier of products to the two pipelines competing with DMM (Trapil and ODC-North).

(143) Concluding, the notified concentration will lead to a dominant position for TotalFinal/Elf on the market for the provision of services for transporting petroleum products per pipeline in northern France.

4.2.3. The effects of the concentration in the market for the provision of services for transporting petroleum products per pipeline in southern France

- Effects on the competition within pipelines

SPMR

(144) This pipeline would be controlled to the extent of 51,6 % by TotalFina/Elf after the merger. Elf and TotalFina hold 32,5 % and 14,1 % of the capital respectively, and Trapil, which would be controlled by TotalFina/Elf, holds 5 %. The resulting total participation will give the new entity a veto right on the operational management of SPMR and as such a form of control, as in fact, the decisions are taken by two-thirds majority.

(145) SPMR's operation has been entrusted to Trapil for an indefinite period (subject to three years' notice). The main shareholders of Trapil and SPMR have drawn up a plan aimed at implementing synergies in order to reduce their managements costs.

(146) SPMR has sometimes been subject to quota restrictions, reducing volumes to as much as 50 %. This has happened notably in response to occasional saturation at times of very heavy demand for domestic heating oil during cold spells and in the light of the pipeline's state of repair. In such cases, the allocation of volumes is calculated on the basis of the volume transported by the party in question during the past three years and hence works to the advantage of the large refiners - the main "historical" users of these installations - and to the disadvantage of the supermarkets and other independents.

(147) TotalFina's action plans mention these supply disruptions. [...].

(148) After the notified transaction, SPMR would be controlled by TotalFina/Elf and its incentives would be aligned on those of its main shareholder, whereas before the transaction the various refiners holding a share in SPMR have had to strike a compromise between their various objectives and, in particular, take account of the significant presence of Elf, which is not an Etang de Berre refinery. In addition, TotalFina/Elf controls the only import terminal that is connected to the PMR, DP Fos. By controlling the access of imports to the pipeline, by using its predominant position in the SPMR's capital and the control over the day by day management of SPMR, TotalFina/Elf would be in the position to increase prices for the provision of refined product transport services for retailers.

- Effects on the competition between pipelines

(149) The ODC-South pipeline is currently poorly used. It is possible that the section of the ODC-South pipeline that starts at the Etang de Berre refinery complex (without being connected to DP Fos) supplying Strasbourg will be modernised with the shut down of the Reichstet refinery in mind. Since this is not factual as yet, the modernisation program can as such not be taken into account for the competitive analysis in the light of this notification.

(150) Concluding, the notified concentration would give TotalFina/Elf significant market power in the market for the provision of services for transporting petroleum products per pipeline in southern France on the basis of their control in SPMR and through the establishment of a leader amongst the other refiner resellers of transport services in the SPMR.

4.2.4. The control exercised by the Government Commissioners

(151) TotalFina argued that the merger would not result in the new group operating the pipelines to the detriment of the other market players, given the protective legislation which governed these transport facilities (the Boards of Directors of Trapil, DMM and SPMR meet in the presence of representatives of the French State who have the power and the duty to ensure that the general interest is safeguarded) and the economic realities to which their operation was subject.

(152) The Commission notes that market power could be exercised at levels which were not discussed by the Directors and were thus invisible to the Government Commissioners. For example, with the merged entity having total control of pipeline transport, it could prevent independents from introducing new or specific products e.g. by requiring that branded products be transported separately or in a period when the specifications are changing (in France, super leaded is currently being replaced by high-octane super unleaded 98).

(153) Lastly, the supervisor function performed by the Government Commissioners in no way undermines the freedom of the pipeline operators to take decisions. They could still have sufficient room for manoeuvre to exercise market power. The Commission is thus unable, on the sole basis of the presence of the Gouvernment Commissioners, who's role it is to sanction eventual abuses occurring after the creation or reinforcement of a dominant position has taken place, to rule out the creation or strengthening of a dominant position.

4.3. Conclusion

(154) The notified transaction would eliminate any competition that there might be between the various pipelines. For example, DMM competes marginally with Trapil for the supplying of the Paris region and the region of Le Mans, Tours and Orléans. Similarly, DMM competes with ODC for the supplying of eastern France.

(155) Since TotalFina/Elf would control the companies that operate Trapil and DMM, it is reasonable to assume that no competitive pressure would henceforth be exerted as between these two pipelines. Moreover, the acquisition of a holding in SFDM by one of the lower Seine refiners could only limit the incentives for DMM 's operator to exert competitive pressure on the main means of transporting refined products from the Seine valley refinery complex.

(156) The notified transaction would therefore lead to the creation of a dominant position on the part of TotalFina/Elf in the markets for the transport of refined products by pipeline in the northern and southern halves of France.

5. SALE OF FUELS ON MOTORWAY

5.1. The reference market

5.1.1. Product market: motorway service stations are in a separate market from that for the sale of fuels off motorways.

- Introduction

(157) Fuel retailing comprises the sale of fuel to motorists by service stations. The fuel in question is mostly petrol or diesel. On the demand side, there is no substitutability between these products as motorists have to use the type of fuel that is compatible with their vehicle. At the distribution level, both products are always available at the same point of sale. Moreover, the market shares for each type of fuel coincide more or less with the combined market shares. Consequently, for the purposes of the present case, the relevant product markets in the retail sales channel cover fuel retailing as a whole.

(158) There are several categories of expressway in France, such as franchised, or toll, motorways, toll-free motorways, perimeter/urban motorways and some trunk roads. The first category are run by companies whose business consists in building and operating motorways, in return for which they are allowed to charge user-motorists a toll. French motorways are owned either by the State or by local authorities, or wholly or partly by private or semi-public companies. The latter are entitled to build and operate motorways under franchises granted to them by the national or local authorities. They in turn grant franchises to fuel retailers for the operation of service stations. Motorway franchises are granted for periods of from 15 to 30 years, but those granted directly by the State or by local authorities generally last 30 years.

(159) A distinction must be made in the market for the sale of fuel by service station networks according as to whether the service stations are situated on or off motorways. This distinction is necessary in view of the notable differences in competitive conditions which characterise the sale of fuels by the two categories of service station.

(160) TotalFina considers that the retailing of fuel on French motorways does not constitute a market separate from that for the distribution of fuel off motorways. It argues that consumers always have a real choice between service stations located on or off motorways. Vehicles have a range of more than 600 km, compared with the average distance driven on a motorway of about 100 km. Similarly, the traffic on motorways is constantly being renewed, there being entries and exits on average every 30 km. Motorists always have the option of filling up at an off-motorway service station, whatever their route. These factors result in motorways being permeable vis-à-vis the off-motorway sector, a very low rate of utilisation of motorway service stations (of the order of [...] of all traffic) and a fall in the volumes sold on motorways. Moreover, in France motorists who are not frequent users of a section of motorway are kept regularly informed by special brochure of any price differences between motorway service stations and other service stations.

- Price differences point to there being separate markets

(161) According to data supplied by TotalFina, the prices charged on motorways for 98 octane unleaded petrol are [...] higher (average for the period from 1 January 1998 to 30 September 1999) than those charged off motorways. This price difference does not, however, reflect the difference in average prices on the market as it is based on the prices invoiced by TotalFina. A comparison between the prices invoiced by TotalFinal on motorways (which are representative of the prices invoiced) and those invoiced by supermarkets off motorways indicates, on the contrary, an average difference of the order of [...] over the same period. A comparison of the average prices on motorways for all brands with the average prices off motorways for all brands shows that on-motorway prices were [...] higher than off-motorway prices in 1998 (as opposed to [...] in 1997 and [...] in 1996).

(162) In its reply to the Statement of Objections, TotalFina argued that the Commission could not base its definition of a separate market on a price differential alone, especially in view of the fact that price differences between service stations on and off motorways were the same as those between off-motorway service stations. In 1998 the average prices charged by TotalFina (the refiner with the highest average prices) off the motorway network were [...] higher than the average supermarket prices and [...] higher than the average off-motorway prices, but [...] lower than the average on-motorway prices for all brands. This argument is not convincing. First, as explained in this Decision, the difference in prices between those charged at motorways and those charged outside motorways is the result of the different conditions in which supply meets demand. The comparison between price differentials as indicated by TotalFina is irrelevant in the sense that, off motorways, there is no geographical continuity between service stations charging a higher price as there is on motorways.

(163) Despite being partly justified by the higher costs incurred by operators (due, among other things, to the obligation to pay a licence fee to the motorway operator, to stay open 24 hours a day and to provide ancillary services, etc.), this price difference would not be sustainable if motorway service stations were actually in competition with other service stations near the motorway. If the consumer had a genuine choice between the two alternative refuelling possibilities, prices would even out around a single market price that reflected supply both on an off motorways.

(164) Similarly, an examination of the relationships between daily or weekly price variations between the off-motorway and on-motorway averages provided by TotalFina for the period 1 January 1998 to 30 September 1999 reveals very little or no correlation ([...]), bearing in mind the uniformity of the wholesale prices for this distribution activity. Off-motorway prices tended to adjust more quickly to falls in the Platt's in 1998 than on-motorway ones. The difference between average pre-tax prices of 98 octane unleaded petrol increased from [...] centimes a litre in January 1998 to [...] centimes in December 1998. Conversely, the subsequent rise in the Platt's was not accompanied by a reduction in that difference, reaching as it did [...] centimes in September 1999

(165) Finally, the existence of important price differentials between sales of motor fuels on motorways in a general sense and sales of motor fuels outside motorways is recognised in the tender documents of the departmental directorate for equipment (Directions départementales de l'équipement/DDE). The DDE is the licensor granting licenses for service stations on non-licensed motorways. [...].

- Demand for fuel on motorways is subject to factors different from those which influence demand for fuel off motorways

(166) A study of average consumption both on and off motorways (see following table) shows identical trends for the sale of fuels in both places. It would not appear, therefore, that there has, as TotalFina maintains, actually been any shifting of demand towards off-motorway service stations. This argument is accordingly invalid as a means of proving that the two categories of service station are in competition with one other.

>TABLE>

(167) In its reply to the Statement of Objections, TotalFina provided further series of data which showed, it argued, that sales of fuel on motorways have not matched the rise in the number of kilometres travelled on the motorway network. TotalFina explained this by reference to competition from supermarkets, which were making more sales at the expense of motorway service stations. This explanation takes no account of the change in the nature of motorway traffic, with unit consumption falling and the share of short-distance transit increasing.

(168) Demand for fuel on motorways would appear to respond to factors other than those influencing demand for fuel off motorways. Motorists take a motorway in order to benefit from a faster traffic flow and the creature comforts associated with motorways, such as refuelling facilities, food, rest points, etc. One consequence of their choice is a reduced responsiveness to fuel prices. While the fact that they have to pay a toll may increase their reluctance to lose time searching for a cheaper service station off the motorway, this is not a determining factor. There is therefore no reason to distinguish between motorway service stations according to whether or not a toll is charged (for the same reasons, the German competition authority has concluded in the past that German motorways, though not subject to tolls, formed a separate market from the rest of the fuel distribution market). [...].

(169) In its reply to the Statement of Objections, TotalFina insisted that consumers exercise free choice in deciding to stop to refuel at a motorway service station when they could equally do so off the motorway. [...].

(170) Thus, in explaining that only a small proportion of users buy fuel on the motorway and that this choice is influenced only in part by price levels, TotalFina merely underscores the distinct nature of this demand by comparison with demand for fuel off motorways.

(171) The dissimilar nature of the demand for fuel on motorways is due also to its seasonal charachter. A large part of annual sales on French motorways takes place during the holiday season. In the case of petrol, the two months of July and August alone account for more than 30 % of sales (20 % in the case of off-motorway service stations). If the months of April and May are added, the figure increases to approximately 50 % of annual sales. Despite being less marked, the same trend is also visible in the case of diesel. Generally speaking, all months which include a holiday period see a rise in sales.

- Distinct conditions of entry and of competition

(172) The vast majority of service station operators on toll motorways are vertically integrated petroleum producers/refined who sell their fuels under their own brand names. Not only do they frequently operate motorway service stations but they also own them. In any event, they have absolute and centralised control over the sales policy of their motorway service stations as far as fuel sales are concerned. The running of motorway service stations would appear to differ from that of off-motorway service stations. [...].

(173) [...].

(174) The brands of the refiners present on French motorways are six in number (TotalFina, Elf, Shell, BP, Esso and Agip). On the entire French motorway network, only three non-refiner operators have been able to establish themselves, namely two independents (Dyneff and Avia) and one supermarket (Leclerc). They account for less than 2 % of all service stations and volumes. The difference compared with the structure of supply on the off-motorway market is considerable; Apart from the presence of supermarkets, which make up over half of the market for the sale of fuels, a multitude of other operators, both refiners and independents, are active there. Thus, in all the internal documents concerning fuel retailing handed over to the Commission, TotalFina is careful to calculate the average price difference compared with supermarkets in the case of its off-motorway prices.

(175) It should also be noted that the conditions governing entry to the motorway market differ appreciably from those governing entry to the off-motorway market. In order to operate a motorway service station, an authorisation in the form of a sub-franchise must first be obtained from the motorway operator (or directly from the State in the case of non-toll motorways). Tenders are invited for this purpose and sites are allocated on the basis of tenderers' ability to meet certain specifications. Further to a 1992 agreement between the French Union of Oil companies (UFIP) and the Union of Toll Motorway Companies, existing motorway service station operators may have their franchises renewed provided they enter into various financial commitments to do with developing their sites. This could result in some franchises becoming more or less permanent, thereby limiting access to the market for new entrants even further.

- Conclusion

(176) It follows from the foregoing that demand for fuel on motorways is distinct and different in nature from off-motorway demand and that the supply of fuels on motorways is not constrained by the supply of fuels off motorways. The significant and persistent price differences between fuels sold on and off motorway confirm this. The relevant product market is therefore that for the sale of fuels on motorways.

5.1.2. Geographic market: there is a chain of substitutability between service stations on each motorway

(177) TotalFina argues that the analysis of competition conditions on the motorway should be carried out for motorway sections of 100 to 150 km. It supports this view by referring to the Total/Petrofina decision. However, it fails to observe that the geographic definition of the market was left open. In the Exxon/Mobil decision under Article 8 of the Merger Regulation, on the other hand, a definition was used which covered all toll motorways.

(178) The analysis suggested by TotalFina is artificial since it does not reflect the domino or chain effect from one station to another. The average distance between two motorway service stations is around 40 km. According to the information provided by TotalFina, service stations using the brand name "Total" [...]. The fact that each service station conducts a similar survey in its turn, pleads for a market definition comprising at least all the service stations on one motorway.

(179) TotalFina argues that motorway service stations on sections of the franchised motorways where drivers have not yet had to pay the toll are not subject to the same competitive constraints as service stations located on sections beyond the tollbooths.

(180) While such data were not available in previous cases, in this case TotalFina supplied the weekly surveys of prices charged by its own motorway service stations and by their competitors. On the basis of these data, it is possible to refine the argument used in the Exxon/Mobil case, which was based on inter-tollbooth motorway sections. Prices charged by service stations after the tollbooths do not differ significantly from those charged by other motorway service stations.

(181) The only exceptions which can be identified from looking at the average prices charged are the following service station: [...]. These stations are probably located on sections of motorway used essentially for daily journeys. For example, the [...] station [...] surveys the prices charged by the [...] station opposite and the two stations on the neighbouring trunk road [...].

(182) It should be noted that the price surveys indicate that service stations on motorways (or sections of motorway) which are not franchised, [...], charge prices which are similar to those charged by stations located on franchised motorways. These motorways should therefore be included in the market.

(183) None the less, a number of motorways with prices close to those charged on the off-motorway market should be excluded form the relevant market. Most of these motorways are located in urban areas, for example [...].

5.1.3. Geographic market: most motorways intersect one another which in practice means that the market extends the sale of fuels across the entire motorway network in France

(184) The following table illustrates the degree of interconnection between the various French motorways.

>TABLE>

(185) The degree of interconnection between motorways gives rise to a chain reaction effect extending from one motorway to another. Thus, a station located near a junction between two motorways will take account, when setting its prices, of the prices charged by its competitors on both motorways.

(186) For example, [...].

(187) It is true that, where motorways cross urban areas by means of ring roads or urban motorways in places such as Bordeaux, Lyon, Marseille, Nantes and Paris, these areas can constitute a sufficiently major interruption of the inter-urban motorway network for the competition conditions not to be the same, for example, on the motorways originating in the north and those arriving form the south. This is clearly the case around Paris given the intensity of the traffic and the wide extent of the Paris region. It is not certain that the same is true of the other cities identified, which cover a smaller geographic area and where there is probably more through traffic.

(188) In conclusion, there is a single market for motorway fuel sales in France. It includes at least the motorways listed at (i) to (iii) below. Even supposing that urban areas actually form a natural frontier between motorways, motorway interconnection would then mean that three possible relevant markets could be defined, on each of which there is a chain of substitutability resulting in one distinct market. These groups are as follows.

(i) Normandy/north/east: A13, A16, A26, A28, A1, A2, A4, A5, A19, A6, A39, A36, A35, A40, A41 and A43;

(ii) west/south: A8, A11, A81, A10, A85, A83, A72, A75, A9, A7, A46, A48, A49, A50, A52, A61, A62 and A20;

(iii) south-west: A63 and A64.

5.1.4. Substantial part of the common market

(189) Each of these groups constitutes a substantial part of the common market. First, they cover very extensive areas of French territory. Second, each of them connects with the motorway networks of neighbouring Member States. They are therefore of prime importance for trade in goods and the movement of people within the European Union. 79 % of France's trade in goods transported by land is carried by road. Goods transported by road account for 92 % by value of trade with other Member States. Lastly, general statistics published by the Ministry of Infrastructure, Transport and Housing's department of technical studies on roads and motorways show that, on average, 10 % of light vehicles and 30 % of heavy goods vehicles using the French motorway network are from abroad. This means that demand for fuels on the motorways is likely to be European whichever motorway is concerned.

5.2. Competition analysis

(190) The comments which follow are based on a national market definition. If the geographic markets corresponded to the three groups of motorways defined above, however, the same analysis would still be valid. Concentration levels are relatively similar and the same players are present on each of the three markets.

5.2.1. Current competition situation

(191) As explained in the Exxon/Mobil decision, the market for motorway sales of fuel clearly suffers form a competition deficit. First, companies compete essentially by means of prices. There is little room for manoeuvre as regards the other factors of competition. Fuels are homogeneous products with a low degree of technological innovation. Volumes sold on the market do not vary significantly. Then, it is easy for the market players to anticipate and react to competitors' actions. Supply is highly concentrated. Price data are available almost immediately. Likewise, the market players are similar as regards costs, vertical integration and their presence in France. Lastly, demand is very price inelastic. The combination of these factors results in a market structure which is conductive to supra-competitive prices.

5.2.1.1. Price is the only factor of competition available to market players

(192) There is little to differentiate the fuels offered by the market players other than their price. Fuel is a fungible product such that refiners systematically have recourse to swap agreements for the purpose of supplying their service stations.

(193) Oil companies have tried to differentiate their off-motorway service stations but this apparently has only limited influence on supply on motorways because of the similar and demanding specifications of the motorway companies.

(194) There is little technical innovation on the fuel retail market. Technical progress relies more on fairly gradual changes to p