EN Official Journal of the European Union C 201/5

Summary of Commission Decision

of 21 October 2008

declaring a concentration compatible with the common market and the functioning of the EEA Agreement

(Case COMP/M.4919 — StatoilHydro/ConocoPhillips)

(notified under document C(2008) 6125 final)

(Only the English version is authentic)

(Text with EEA relevance)

2009/C 201/06

On 21 October 2008 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1) , and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case and in the working languages of the Commission on the website of the Directorate-General for Competition, at the following address:

http://ec.europa.eu/competition/mergers/cases/decisions/m4919_20081021_20600_en.pdf

I. INTRODUCTION

1. On 14 March 2008, the Commission received a notification pursuant to Article 4 of Regulation (EC) No 139/2004 (‘the Merger Regulation’) of a proposed concentration by which the undertaking StatoilHydro ASA (‘SH’, Norway) acquires within the meaning of Article 3(1)(b) of the Merger Regulation the Scandinavian petroleum businesses of ConocoPhillips Company (‘ConocoPhillips’, United States of America), namely ConocoPhillips Denmark APS (‘JET Denmark’), ConocoPhillips Nordic AB (‘JET Sweden’) and ConocoPhillips JET AS (‘JET Norway’). JET Denmark will be acquired by Statoil A/S (Denmark), JET Sweden by Svenska Statoil AB (Sweden) and JET Norway by Statoil Norway AS (Norway).

2. The Scandinavian businesses of ConocoPhillips will collectively be referred to as ‘JET Scandinavia’.

3. After examination of the notification, the Commission concluded on 13 May 2008 that the notified operation fell within the scope of the Merger Regulation and that it raised serious doubts as to its compatibility with the common market and the EEA Agreement. The Commission therefore initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

II. THE PARTIES

4. StatoilHydro ASA (SH) is an integrated oil and gas company active in the exploration and production of crude oil and natural gas (mainly in Norway), refining and retail and non-retail sales of fuels and other oil derivatives. SH was created in 2007 when Statoil ASA acquired Norwegian oil and gas company Norsk Hydro ASA (2). SH operates retail motor fuel outlets in Denmark, Norway and Sweden under the ‘Statoil’ brand (3). In addition, the company operates retail motor fuel outlets in Sweden under the ‘Hydro’ brand.

5. JET Scandinavia operates retail motor fuel outlets in Denmark, Norway and Sweden under the ‘JET’ brand. JET Sweden also owns storage facilities for refined petroleum, one of which is dedicated to supplying JET Norway's retail network.

6. SH and JET Scandinavia will be referred together as the Parties hereafter.

III. THE RELEVANT MARKETS

7. SH and JET Scandinavia are both active in the markets for retail sales of motor fuel.

8. For the purpose of this case the relevant product market has been defined as the market for retail sales of motor fuels.

9. The product market is national because notably many service stations have largely overlapping catchment areas, which create ‘knock-on’ pricing effects, and the most important competitive parameters tend to be decided at a national rather than at a local level. However given that most retail fuel chains monitor neighbouring retail fuel stations, the assessment has to take into account that competition also takes place at the local level.

IV. COMPETITIVE ASSESSMENT

10. The Decision considers that the proposed merger raises serious doubts as to its compatibility (i) with the common market on the market for retail sales of motor fuels in Sweden and (ii) with the common market and with the EEA agreement on the market for retail sales of motor fuels in Norway.

11. The Decision considers that the proposed merger does not raise serious doubts as to the market for retail sales of motor fuels in Denmark, since the merged entity will continue to face competition from the remaining players on this market.

1. Competition concerns raised by the proposed concentration in Sweden

12. SH is already the largest supplier by far in the Swedish market for retail sales of motor fuels and by acquiring JET Sweden (market share of [10-20] %) — thereby adding a substantial increment to its market share — SH will consolidate further its position as the leading service-station chain in the Swedish market, in a context of considerable barriers to entry.

13. JET Sweden, which operates purely automated stations (163 stations), is the most efficient operator in the Swedish market with an average throughput per station which is far higher than its competitors.

14. JET Sweden systematically undercuts its rivals’ prices by applying a price differential and has a long history of defending the differential if challenged by competitors.

15. SH's internal documents show that SH regards JET Sweden as its strongest competitive constraint.

16. JET Sweden's strong competitive constraint has been confirmed by (i) the market investigation, (ii) the consumer survey and (iii) the econometric analysis relating to JET Sweden's impact on the Statoil network's pricing, all carried out by the Commission.

17. The Decision therefore concludes that the removal of JET Sweden as an independent competitor and its merger with the largest operator in Sweden gives rise to serious doubts as regards its impact on competition in the Swedish market for retail sales of motor fuels.

2. Competition concerns raised by the proposed concentration in Norway

18. The Norwegian market for retail sales of motor fuel is highly concentrated, since [90-100] % of this market is shared between the four incumbents (SH, Shell, Esso, YX Energi). JET Norway has a market share of about [0-5] %.

19. JET Norway's incentives are different from the four incumbents’, since, unlike them, JET Norway (i) is the only player which operates a network of purely automated fuel stations in Norway, (ii) has a pump net pricing which gives a strong and attractive signal to customers, (iii) is only active in South east Norway due to logistical difficulties which have prevented the company from expanding throughout Norway.

20. JET Norway constrains the competitive behaviour of its rivals, since JET Norway (i) has a higher market share in South east Norway ([5-10] %) than at national level, (ii) is the most efficient operator in the Norwegian market with an average throughput per station which is far higher than its competitors, (iii) is profitable, despite its logistical difficulties, (iv) systematically undercuts its rivals' prices of non-automated stations by applying a price differential.

21. SH's internal documents show that SH regards JET Norway as a strong competitive constraint.

22. JET Norway's strong competitive constraint has been confirmed by (i) the market investigation, (ii) the consumer survey and (iii) the econometric analysis relating to JET Norway's impact on the Statoil network's pricing, all carried out by the Commission. In addition the Norwegian competition authority also confirmed JET Norway's strong competitive constraint in South east Norway.

23. The Decision therefore concludes that the removal of JET Norway as an independent competitor, would give rise to unilateral effects in a context of high barriers to entry. For these reasons the Decision concludes that the transaction gives rise to serious doubts as concerns competition in the Norwegian market for retail sales of motor fuels.

3. Commitments offered by SH

24. In order to remedy the competition concerns identified by the Commission, the parties submitted commitments relating to Norway and Sweden on 25 July 2008.

25. The answers of the market test showed that, subject to an adjustment, the commitments offered by the parties were sufficient to remove the competition concerns raised by the proposed transaction.

26. After being informed by the Commission on the results of the market test, the parties modified their initial commitments, by including the adjustment mentioned above, on 1 September 2008.

(a) Content of the commitments proposed on 25 July 2008

27. In Sweden, SH proposes the divestiture of a 158 unmanned stations network. This network, consisting of 118 Hydro stations and 40 JET stations, would represent a market share of about [5-10] %.

28. In addition, SH proposes to offer the buyer the options (i) to buy the current stake (50 %) of JET Sweden in a JV (between JET Sweden and SH) which owns and operates 2 depots in Sweden, (ii) to source petrol and diesel from certain SH's depots or certain third parties depots at which SH has throughput or exchange agreements, until 31 December 2011, (iii) to be provided with arrangements to meet the compulsory storage obligations under Swedish law until 31 December 2011 and (iv) to be provided with relevant contracts with logistic operators for the distribution of refined products to JET's stations, until 31 December 2011.

29. In Norway, SH would acquire JET Norway, but not exercise control over it and would resell it with appropriate transitional arrangements. Moreover, the purchaser cannot have a pre-transaction market share above 10 % on the Norwegian market for retail sales of motor fuels.

30. In addition, SH proposes to offer JET Norway's buyer the options (i) to buy the Swedish depot (located in Strömstad, on the Norwegian border) currently owned by JET Norway and used for its retail sales in Norway, (ii) to buy a certain volume of petrol from SH until 31 December 2011, (iii) to be provided with arrangements to meet the compulsory storage obligations under Norwegian law until 31 December 2011 and (iv) to be provided with relevant contracts with logistic operators for the distribution of refined products to JET's stations, until 31 December 2011.

(b) Assessment of these commitments

Sweden

31. The proportion of respondents considering that the proposed remedy would remove the competition concerns and the proportion of those considering the contrary was balanced. The same balanced result was noted as to the viability of the network divested.

32. The doubts expressed about the removal of competition concerns referred (i) to SH's current strong market position and (ii) to the fact that the divested network would be too small and not able to exert a competitive constraint on SH post merger

33. The main doubts expressed about the viability referred (i) to the global and the average throughputs of the newly created network and (ii) to the fact that the Hydro stations to be divested would be badly located.

34. In addition, a clear majority of respondents considered that the duration (three years) of the supply agreement offered by SH to the potential purchaser was too short. Several respondents stated that a five-year duration would be necessary.

35. The Decision found that the concerns relating to both the removal of competition and the viability were not well grounded.

36. Indeed, the new network (i) will have the third highest average throughput, after SH and Tanka, (ii) has a nationwide coverage, (iii) is well represented in the most populated areas and (iv) would have the ‘critical mass’ necessary to cover overhead costs and be an efficient competitor.

37. Finally, several respondents expressed an interest in acquiring the new network.

38. On 1 September 2008 SH submitted an amended commitment proposal, offering potential purchasers of the divested network the possibility to extend the supply agreement from three to five years, until 31 December 2013. Given this extension, the length of the supply arrangements is no longer a cause for concern to the Commission.

39. Accordingly, the Decision considers that the proposed remedies will remove the Commission's serious doubts concerning Sweden.

Norway

40. The overwhelming majority of competitors considered that the divestiture of JET Norway would establish a viable competitor and remove the competition concerns expressed by the Commission.

41. Moreover, the purchaser of JET Norway will have an incentive to put a competitive constraint on SH and the other three incumbents, since the purchaser will not be allowed to have a pre-transaction market share of more than 10 % of the Norwegian market for the retail sale of motor fuels. This provision will prevent any of the other three incumbents from acquiring JET Norway.

42. However, as in Sweden, a clear majority of respondents considered that the duration (three years) of the supply agreement offered by SH to the potential purchaser was insufficient. Several respondents stated that a five-year duration would be necessary.

43. On 1 September 2008 SH submitted an amended commitment proposal offering the potential purchaser of JET Norway the possibility to extend the supply agreement from three to five years, until 31 December 2013. Given this extension, the length of the supply arrangements is no longer a cause for concern to the Commission.

44. Accordingly, the Decision considers that the proposed remedies will remove the Commission's serious doubts concerning Norway.

V. CONCLUSION

45. For the reasons mentioned above, the Decision concludes that, subject to compliance with the commitments submitted by SH, the notified concentration should be declared compatible with the Common Market and the functioning of the EEA Agreement, in accordance with Article 8(2) of the EC Merger Regulation and Article 57 of the EEA Agreement.

(1) OJ L 24, 29.1.2004, p. 1-22.

(2) See case COMP/M.4545 — Statoil/Hydro, Commission Decision of 3 May 2007.

(3) SH also operates retail motor fuel outlets in Poland, Russia, Estonia, Lithuania and Latvia.