The CMA has announced that it has concerns about the merger of petrol station operators Motor Fuel Group (MFG) and MRH (GB) Limited, in relation to 29 localities in the UK where MFG and MRH are close competitors and the merger could result in price rises for local motorists. While its Phase 1 investigation concluded that the merger would not raise competition concerns across the UK as a whole, because major petrol retailers and supermarkets provide competition that will keep the merged business from increasing its prices, merger control is concerned not just with nationwide competitive effects - it will also catch deals that could affect competition at the local level.

The full decision is awaited so we do not yet know the 29 locations in question. However, the CMA's concern is presumably that MFG and MRH are each other's principal competitors in each of those areas, and so if that competition disappeared prices could go up and/or quality levels down, at the expense of local customers.

In a previous case involving petrol stations (MFL/Murco) the CMA concluded that a station would compete with (and so be constrained by) other petrol stations within a 10 or 20 minute drive time, but stations beyond that limit would not be relevant. Having identified that 'geographic market', the CMA then looks for areas where the merging parties are both present but the number of other operators is low. As a (very high-level) rule of thumb, a merger that would result in fewer than four independent participants in a market could be expected to give rise to competition concerns.

Local competition matters

The lesson of the CMA's decision is that local competition is important, and should be considered even in relatively small deals where the parties are the main players in local markets with limited competition. This is not limited to petrol stations - it will also catch other businesses that serve local customers who can't or won't travel very far to find alternative suppliers, such as grocery retailers or vehicle repair centres. Such businesses should therefore think carefully about merger control before seeking to acquire any of their competitors. Even just acquiring a competing outlet can trigger merger control if there is limited competition in the relevant market: the CMA has dealt with multiple deals where a small number of individual supermarkets has changed hands.

MFG had until 7 September to offer a solution to the CMA that would avoid a referral to a CMA panel for an in-depth phase 2 investigation (most likely divestment of the 'problem' stations). In the meantime a "hold separate" order is in effect, which prohibits completion of the merger until the CMA has concluded its inquiry.

Contributor

Jamie Dunne

Legal Director