Competition Bureau
ToolsRelated topicsResourcesCompetition Bureau Finds No Evidence to Support Allegations of Anti-Competitive Behaviour in Chatham Ontario Gasoline MarketOTTAWA, December 30, 1999 - The Competition Bureau, after completing an examination of the gasoline market in Chatham, Ontario, has concluded that there are no grounds to apply to the Competition Tribunal for a remedial order or to take action in the criminal courts. The investigation originated with a complaint filed by Mr. Mike Crombez, an independent gasoline retailer in Chatham. The Bureau's examination included a review of information and data provided by industry sources, as well as interviews with industry participants. The complainant essentially raised two major concerns, that he was charged higher wholesale prices by Sunoco than the prices Pioneer was charging at the retail level and that Pioneer was selling below its acquisition costs. The Bureau reviewed these allegations to determine whether they raised an issue under the Competition Act. The Bureau noted that the structure of the gasoline market in Chatham includes a variety of players including three national refiner-marketers, one regional refiner-marketer, and eight non-integrated retailers. The highest market share is held by Sunoco but is less than one fifth of the market. Likewise, Pioneer's market share is approximately 10 percent. The total market share of the top four firms is less than 65 percent. The group of integrated companies have a combined share under 50 percent. Independents as a group have over 50 percent of the market. To address the first allegation, the Bureau reviewed pricing data. During the period of review (i.e. February and March 1999), it was determined that Pioneer' s retail price was below its wholesale price for one day only, on March 5, 1999. Pioneer's retail price was less than the complainant's wholesale price between February 28 - March 5, 1999 and equal to it on February 27, 1999. Within the overall period of review, the complainant's retail price was lower than Pioneer's retail price on several occasions. The variation in wholesale prices can be attributed to a variety of factors that do not demonstrate anti-competitive activities, including differences in volumes purchased and the terms of supply arrangements negotiated. The complainant is supplied by a broker and purchases a relatively small volume, whereas Pioneer purchases product on a province -wide basis directly from an integrated producer. It should be noted that volume discounts do not raise an issue under the Act. With respect to the second allegation, there is no evidence of a strategy to sell below cost. Pioneer's retail price was lower than its wholesale cost on only one day which is not sufficient to show a practice of selling below cost. The Bureau then determined whether any of the criminal provisions of the Act had been violated ie. sections 50(1)(b) and 50(1)(c) (predatory pricing). The Bureau found that Sunoco/Pioneer does not dominate the market. No policy of low pricing by Pioneer was uncovered and a one day price inversion is not sufficient to support a finding of predation. There was no coordinated behaviour, such as Pioneer selling below cost to hurt Sunoco's competitors. Pioneer competes with Sunoco at the retail level. With the existing competition and possible new entry due to low barriers to entry, it does not have the capacity to raise prices above competitive levels. The Bureau looked for any evidence that the practices had resulted in an abuse of dominant position under the civil provision of the Act ( Section 79). Examining market share, the Bureau found that no one firm, including Pioneer or Sunoco, dominates the Chatham retail market. There is no joint dominance by Pioneer and Sunoco or by the four largest firms in this market. No evidence of joint behaviour was found. The supply by a gasoline broker removes Sunoco's ability to control the wholesale price charged to the complainant. Thus Pioneer and Sunoco do not have the required control at the retail and wholesale level for squeezing under the Act. The term "squeezing" refers to an attempt by a vertically integrated supplier to cause an increase in the wholesale price to an unintegrated customer (competitor) while attempting to decrease this customer's retail price; these two actions reduce the customer's margin. Thus, the first element of the section, control, has not been established. Several other allegations made by the complainant were reviewed and it was concluded they did not raise an issue under the Act. On the basis of the facts uncovered during the Bureau's examination, and for the reasons noted above, there are no grounds to proceed with an application to the Competition Tribunal or to the criminal courts and the examination is closed. For a complete explanation of these findings, please see Report on Chatham Gasoline Market. For further information, please contact: Richard Taylor 
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Created: 1999-12-30 Updated: 2005-04-27 |
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