No Competition in the Fuel Sector in the UK ⛽️

Hey there! 👋

In this article, Abdifatah Mahamed explores the CMA’s investigation into the fuel sector and why this affects consumers.

The Competition and Markets Authority (CMA) discovered that UK drivers were overcharged by £1.6 billion for fuel in 2023 due to a lack of competition in the sector, affecting customers during a cost-of-living crisis.

In recent years, growing fuel costs have plagued consumers, affecting their daily lives. This begs the question of how to navigate and respond to these corporate activities. Is greater regulation required, or should customers demand transparency and better options?

Why is this happening?

The investigation discovered that a small number of corporations own the majority of petrol stations, allowing them to maintain high prices without fear of competition. The oligopoly in the petrol sector prevents new companies from entering and offering competitive pricing, which makes the issue worse.

What about the supermarket petrol stations?

Notably, after being acquired by private equity firms in 2021, Both Asda (TDR Capital) and Morrisons (Clayton, Dubilier & Rice) raised their fuel profit margin by almost 3 times since the acquisition. Asda alone pulled in £1 billion in profit and Morrisons respectively £970 million in 2023. This highlights how changes in corporate ownership can have a direct impact on pricing strategies. The primary aim of their acquisitions is not only to restructure the business but also to identify untapped opportunities to boost revenue often to the detriment of consumers.

How would a law firm be involved? ⚖️

Competition lawyers, in particular, may need to advise clients such as oil companies and supermarkets on the potential risk of an abuse of dominance investigation by the CMA. Oil companies are controlling vast portions in the UK and supermarket petrol stations are trying to leverage their convenience of having essential consumer goods alongside their petrol stations. There’s a growing concern that dominant firms could be leveraging their power unfairly, which could trigger scrutiny by the CMA under competition law. Legal professionals may need to guide their clients in ensuring compliance and mitigating risks of hefty fines or penalties that come with such investigations.

In light of the regulator’s recent crackdown on abuse of a dominant position in the market to foster fair business practices. There is a strong possibility that the CMA will open up more investigations into industries perceived to be inflating prices or exploiting market power, with heightened attention on consumer welfare during the cost-of-living crisis, competition lawyers are likely to see an uptick in cases where regulators uncover abuses of dominance. These investigations could lead to greater competition, driving down prices and benefiting consumers, while creating additional legal work for law firms as they navigate this evolving landscape.