CPC sanctions „Lukoil-Bulgaria“ EOOD 67 771 454 BGN for abuse of a dominant position

By Decision № 184/16.02.2023, ruled on case № KZK-864/274/2021, CPC imposed a pecuniary sanction in the amount of BGN 67,771,454 on „Lukoil-Bulgaria“ EOOD for infringement of Art. 21 of the Law on the Protection of Competition. The violation of the law, consisting in an abuse of a dominant position in the form of a margin squeeze, performed against the company's competitors in the wholesale trade of motor fuels on the national territory, which can prevent, restrict or distort competition on the fuel markets and affect the consumers` interests.

The investigation was initiated upon a formal request of „OMV Bulgaria“ OOD in connection with serious concerns about the violation of competition by „Lukoil Bulgaria“ OOD on the fuel markets in the country. It was subsequently joined by a request from „Insa Oil“ EOOD and signals from wholesale market participants.

In this regard, CPC collected a vast amount of information - from „Lukoil-Bulgaria“ EOOD, „Lukoil Neftohim Burgas“ AD, National Customs Agency and almost all large traders and tax warehouse keepers.

Thanks to the timely intervention of the CPC, the targeted strategy of „Lukoil-Bulgaria“ EOOD to gradually take over the wholesale fuel market, was prevented. In particular, the company is trying to create the impression that the new price policy, adopted towards its traders, will lead to lower prices for the end customers. Since such behaviour is well known to the EU antitrust  authorities, CPC considers that, in practice, the only interest of the dominant undertaking, which „Lukoil-Bulgaria“ EOOD undoubtedly is, aims to eliminate its competitors and, in the long term, to impose unilaterally higher consumer prices. In this regard, it should be noted that the wholesalers and the tax warehouse keepers are those, who could oppose the dominant undertaking by exerting some competitive pressure, insofar as they have the possibility of importing or supplying fuels from alternative refineries.

From the analysis of the significant volume of collected data, some basic facts could be highlighted:

„Lukoil-Bulgaria“ ЕOOD owns more than half of the market and is the leader in the wholesale of motor fuels. It is part of the Lukoil Group, which owns unique logistics, warehousing and transport infrastructure with a strategic geographical location and operates along the entire chain from fuel production to its sale to end users.

The Commission established that „Lukoil-Bulgaria“ EOOD had implemented a comprehensive strategy to restrict  the competition in the wholesale of fuels in the country. Through changes in its pricing policy in 2021, the company has completely removed the quantity discounts it granted for the wholesale of motor fuels under excise duty suspension arrangement, while traders purchasing fuels from Lukoil-Bulgaria petroleum bases with paid excise duty, received an additional discount. A unilateral pricing policy was applied on the relevant markets, which led to the existence of the so-called „margin squeeze“. This infringement is also demonstrated by the tests carried out in accordance with the European economic theory and practice. As a result of the margin squeeze, the dominant undertaking's competitors, which can only influence „Lukoil-Bulgaria“EOOD pricing policy, could not effectively oppose the company on price level and this led to outflow of customers, financial losses and market exits. In addition to eliminating the competition, such behavior also reduces the incentives for potential new traders and investors to enter and expand in the fuel markets, which will ultimately harm the end customers. Given the interdependence of the wholesale and retail markets for motor fuels, the increase in wholesale fuel prices due to weakened competitive pressure, resulting from Lukoil-Bulgaria`s behavior, will have a direct effect on the prices of motor fuels, offered by petrol stations, which is known to be of great socio-economic importance.

As a result of the active actions of the CPC, in the course of the proceedings, „Lukoil-Bulgaria“ EOOD changed and corrected its behavior, which is the most important objective of the antitrust authority, namely to provide protection and conditions for the expansion of competition.

The decision of the Commission may be appealed before Administrative Court – Sofia Region by the parties to the proceedings or by any third person that has legal interest within a term of 14 days.

The full text of the Decision is available in the public electronic register of the CPC at http://reg.cpc.bg/