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Competition Bureau of Canada

Competition Bureau

Petro-Canada and Ultramar have decided to discontinue their joint venture

OTTAWA, June 22, 1998 - The Competition Bureau has learned that Petro-Canada and Ultramar Diamond Shamrock (Ultramar) have decided to discontinue their joint venture arrangement following discussions with the Bureau.

After an intensive five-month investigation, and several discussions with both companies, the Director of Investigation and Research, Konrad von Finckenstein, had informed the companies of his serious concerns that the transaction would likely cause a substantial lessening or prevention of competition in wholesale and retail petroleum markets in Quebec and Atlantic Canada.

As a result, the two companies have chosen today to abandon their proposed merger.

“In joint ventures of this size, there is often room to restructure a deal to alleviate competition concerns,” added Mr. von Finckenstein. “However, in this instance no workable alternatives could be identified.”

In its investigation, the Competition Bureau’s team of 20 lawyers, economists, accountants, industry specialists and experienced merger investigators found that the proposed merger would have led to a substantial lessening or prevention of competition in the Quebec and Atlantic Canada markets, where the two companies currently compete at both the wholesale and retail levels.

“The Petro-Canada and Ultramar decision will be good for independent gasoline retailers and consumers,” noted Mr. von Finckenstein. “Petro-Canada and Ultramar are profitable in both Quebec and Atlantic Canada, so we see no reason why they cannot remain in those markets as vigorous, efficient and effective competitors in the supply of refined petroleum products.”

In its investigation, Competition Bureau staff interviewed and obtained documents from the parties, independent gas retailers, importers of crude oil and refined petroleum products, other refiners and wholesalers, industry associations and provincial authorities from across the country.

Throughout the January to May investigation period, the lines of communication between Competition Bureau investigators and legal counsel for the two companies remained open. As a result, both Petro-Canada and Ultramar were aware of the Bureau’s preliminary concerns at a very early stage and were encouraged to respond at every juncture.

Key concerns raised by Bureau investigators related to the Quebec and Atlantic Canada markets, where the two companies currently compete at both the wholesale and retail levels, include:

  • The removal of a vigorous and effective competitor like Ultramar at both the wholesale and retail levels for gasoline and other oil-based products.
  • Increased levels of concentration for gasoline and distillate products, and the likelihood that prices could increase.
  • The fact that costs at the wholesale level inevitably trickle down to consumers over the longer term.

“The mandate of the Competition Bureau is to maintain competitive markets,” explained Mr. von Finckenstein. “In the final analysis we must be sure that consumers across the country have access to as wide a range of products as possible at the best possible prices.”

The Competition Bureau is an independent law enforcement agency that is responsible for merger review and the lawful conduct of business in Canada, as defined by the Competition Act.


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