Background
On 19 February 2025, the FCO published the final report on its sector inquiry into the refining and wholesale of fuels (available as a German version and the executive summary available as an English version). As detailed in our client alert of 13 April 2022, the FCO launched its sector inquiry in 2022 in response to the market disruptions caused by the outbreak of the war in Ukraine and the subsequent EU embargo on Russian oil products, which led to a sharp rise in crude oil prices and a disruption of supply sources for the German fuel markets.
The 218-page report is based on section 32e ARC and presents the FCO’s findings of the second phase of its inquiry which focuses on the wholesale level and, according to the FCO, raises serious competition concerns, in particular about the use of price assessments in this sector.
Sector inquiries of this kind do not focus on individual market participants and, by themselves, cannot be enforced against individual companies; rather, they aim to provide the FCO with a thorough analysis of market developments and the competitive landscape within specific markets which, in turn, can result in separate investigations or enforcement action the FCO may consider necessary.
The FCO’s interim report published in November 2022 (available as a German version and the executive summary available as an English version) focused on the refinery level and essentially concluded that the temporary decoupling of pump prices from the crude oil price was mainly scarcity-related and the tax cut on fuels introduced by the German government in the summer of 2022 had been largely passed on to consumers (for further details, please see our previous client alert of 14 June 2022).
The FCO’s final report was published on 19 February 2025. It expanded on the interim report by addressing additional competition issues relating to the wholesale level, namely, the production and import of diesel, petrol and light heating oil.
Importance of price assessments
In its final report, the FCO highlights the importance of price assessments in the sector, which are used as a reference for the sale of crude oil, refined products and fuels, both in long-term and spot contracts. It identifies two main providers of price assessments for the German wholesale markets: S&P Global Commodity Insights (also known as Platts) and Argus Media. According to the FCO, Platts only provides international price assessments, while Argus (Argus O.M.R.) also publishes regional price assessments for Germany. The FCO notes that price assessments are not used at the retail level, but they may indirectly affect the retail price by influencing the wholesale price that petrol stations have to pay, which is based on long-term supply contracts.
Competition concerns
The FCO raises serious competition concerns about the use of price assessments in this sector, which stem from the existing market structures and the design of the price assessment systems. The FCO refers to a high degree of vertical integration across the market levels and contends that they are highly concentrated, homogeneous, interdependent and transparent. It also notes that the demand side lacks sufficient buyer power, both from direct customers and end customers, which would effectively limit the providers’ actions at the refinery and wholesale levels. These factors facilitate an increased risk of collusive behaviour among market participants, further enhanced by the way price assessments are determined and published. The FCO finds that price assessment providers rely on voluntary reports from market participants on transactions, bids and offers, and that they publish detailed information on individual transactions and market players, which allows for an indirect exchange of information on key competition parameters and monitoring of competitors' behaviour. At the same time, price assessments were found to be based on limited data, both in terms of the number of reporting companies and the number of reported transactions, whereas the seller side typically dominates the reporting. These factors were found to potentially create incentives and opportunities for market participants to influence or manipulate price assessments unilaterally in their favour. In the FCO’s view, possible collusion or manipulation in the spot market may have far-reaching effects on the price of long-term contracts, which account for most supply volumes.
Effects on consumer behaviour
The FCO also examined the effects of the frequent price changes at petrol stations on consumer behaviour. It notes that the number of price changes had increased from an average of four to five per day in 2014 to an average of 18 per day in early 2024, resulting in high price volatility throughout the day. Previously, the FCO was concerned with limited price competition at the retail level whereas it now sees indications that fewer consumers may be attempting to buy during price dips than almost 10 years ago, mainly due to increased price opacity. Looking at regulations in other countries that have imposed legal limits on the number of daily price changes at the retail level, the FCO noted that the empirical or theoretical studies on the effects of such measures imposed on retail prices are inconclusive.
The FCO’s findings
The FCO's findings on potential competition concerns in the fuel wholesale market relate mainly to the regional pricing dynamics, price assessments and potential anti-competitive risks. The FCO determines that fuel markets at the wholesale level are regional rather than national and that tank storage services have limited influence on pricing. The FCO identifies price assessments as a key factor shaping prices across the mineral oil industry, emphasising risks of collusion and price manipulation, particularly in the spot market. To address these concerns, it recommends that legislators either impose stricter legal requirements on price assessments in the EU or that the European Commission revises the International Organization of Securities Commissions (IOSCO) Principles for Oil Price Reporting Agencies (IOSCO principles). Additionally, the FCO is considering entering into proceedings under section 32f (3) ARC, which provides a far-reaching and powerful enforcement tool, to determine whether price-setting practices contribute to ongoing market distortions at the wholesale level. Lastly, it raises concerns about increasing price opacity at petrol stations due to frequent price fluctuations, signalling the need for further regulatory scrutiny.
What's next?
FCO proposals to address the competition concerns identified in the report include the following:
- Legislators to examine whether the price assessments used in the EU as a reference in the physical, also purely bilateral, trade in oil products should be made subject to stricter legal requirements and whether stronger legal measures should be taken to prevent manipulation and collusion based on such price assessments. The FCO noted that existing EU legislation, such as the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), the Regulation on Market Abuse (MAR) or the EU Benchmarks Regulation, is not or only to a limited extent applicable to the price assessments in the mineral oil sector. Alternatively, the FCO proposed that the European Commission should launch an initiative to revise the IOSCO principles for oil price reporting agencies and the corresponding provisions in the EU Benchmarks Regulation. The FCO suggested that the revised principles should address the competition concerns raised by price assessments, such as by imposing an extended waiting period before publishing transaction details, offers, bids and other information that could identify individual companies, by limiting the degree of geographic detail in some price assessments and by adapting the possibility of selectively reporting transactions, bids and offers.
- Entering into proceedings under section 32f (3) ARC to examine whether there is an indication for a significant and continuing malfunctioning of competition at the wholesale level, including ex-refinery sales for the distribution of diesel, petrol and light heating oil, based on possible collusion and manipulation of prices and price components. The eleventh amendment to the ARC provided the FCO with a new enforcement tool which, in certain circumstances, allows it to take far-reaching enforcement action to protect competition following a sector inquiry, irrespective of whether competition law provisions have been violated (for further details please see our previous client alert of 13 April 2022). The FCO indicated that it would assess which measures may be suitable, necessary and appropriate to tackle the issues at hand and determine which companies they should be applied to in these proceedings.
- Aiming to decrease price opacity at the retail level caused by the frequent price changes, including considering further investigations and lobbying for possible regulatory action. The FCO notes that the increasingly frequent price changes may result in reduced price competition at the retail level. The FCO also noted that the potential effects of highly volatile prices should be further investigated in more detail and, depending on the results, further steps, including the possibility of regulatory action, should be considered.
Reed Smith comment
The findings of this sector inquiry represent another step in the FCO’s ongoing efforts to scrutinise the fuel sector. We note that the FCO has operated the Market Transparency Unit for Fuels (Markttransparenzstelle für Kraftstoffe – MTS-K ) for many years at considerable expense. It is intended to fix an asymmetry on petrol price information by enabling consumers’ access to real-time fuel prices of all petrol stations in Germany at any given time. Ironically, before the FCO launched the MTS-K, it considered the lack of consumer price transparency and price competition at the retail level to give rise to competition concerns and now it views the level of transparency at the wholesale level and the heavy price fluctuations at the retail level to pose a risk to competition.
It remains to be seen whether the FCO will target individual companies in a next step. While the sector inquiry itself does not focus on specific companies and instead evaluates the market as a whole, it is likely that the FCO's findings will prompt actions against individual market participants in the near future.
How Reed Smith can help
The FCO’s report addresses various competition concerns that stakeholders in the refining and wholesale fuel sector across Germany and the EU should take seriously. Companies may encounter formal information requests and investigations, or increased legal and compliance requirements, all of which could influence pricing strategies and market operations. Reed Smith can assist companies in navigating these challenges by providing professional legal advice on compliance with applicable competition laws, representing them in proceedings initiated by the FCO or helping them develop strategies to mitigate the risks. Our team of experienced attorneys can also guide companies through the complexities of regulatory changes and ensure they remain informed and act compliant with evolving legal standards.
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