Question

The Hellenic Competition Commission (HCC) in a previous Decision (No. 418/V/2008) launched a sector inquiry into the oil industry in Greece (e.g refining, wholesaling and retailing market segment) and claimed among others that multinational oil companies (BP Hellas S.A and Shell Hellas S.A) supported their filling stations (branded retailers) when competitors temporarily reduced prices to increase sales, requiring that the discount was passed on to the consumer ("price support" discount scheme). (a) Give an overview of the decision adopted by the HCC focusing solely on the wholesale oil market segment. Briefly describe the two oil companies. IMark: 0.5] (b) Define the relevant product(s) and geographic market(s) for the wholesale oil market segment in Greece. What type of quantitative economic tools are the proper ones to correctly delineate the relevant markets in such a case? [Mark: 0.5] (c) What economic arguments dictated the abolishment of the "price support" discount scheme by the HCC? [Mark: 1.0] (d) Did the competent Ministry adopt this policy measure? Critically discuss what was the impact of the relevant decision to consumers over the period 2009-2018 (i.e evolution of retail prices, consumption and variety of the petroleum products offered by the wholesalers) and how did the oil industry change thereafter in terms of competition Comment on your findings [Mark: 1.5] Hint: This is an essay type question and students are free to express their views provided that they are well grounded on economic analysis ad are logically consistent. Students ar use official sources that can be found online on the Hellenic Competition Commission's website and the answer should be at most two page answer should be at most two pages long.

Answer 1

Answer (a) : BP Hellas S.A and Shell Hellas S.A are companies which deal in the trading of Petroleum and oil products and act as the building bridge between the oil exacters and the oil purchasers. They primarily focus on the purchase, branding, packaging, marketing and distribution of the fuel and fuel products. It was lately observed that companies like this were indulging in activities such as not passing on the benefit of the overall fuel and petroleum price reduction to the customers, and the benefit was being absorbed in its internal processes. The Hellenic Competition Commission was thus set up to investigate and determine the current situation. As per the initial findings of the Hellenic Competition Commission (HCC ) determined and observed BP Hellas S.A and Shell Hellas SA were indulging in activities such as not allowing the product flow of the oil industry to continue as normal and they were trying to maximize their profits at the cost of the customers ignorance of the reduction in prices. The wholesale market of Petroleum and oil products has had some unmentioned codes which guided all such oil trading companies to function at an uninterrupted pace and without any short comings. It is these two companies that were found to be deviating from the usual practices and indulging in forcing super normal profit at the coast of the customer’s loss.

Answer (b) : The Oil Trading market in Greece has lately seen a lot of flourish. A number of oil trading companies have engrossed themselves in the trading business and have enlarged the Greece Oil Trading companies’ market. Some of the primary products that these companies deal with are the trading of lubricants, fuel and fuel products, petroleum and oil products, the equipment’s which are used in the fuel stations, products such as Glycerin , bio-diesel , the chips of the wood garden and that of the wood pellets, electricity production and distribution ,dealing in Car accessories, fuel from paraffin etc. The best market and economic process or tool to delineate or figure out the real market in the fuel and petroleum trading industry is the demand from the customers and their reviews after the product is being used. When customers are satisfied by the products they are buying and there is huge demand coming in for the similar products with the same trading company, it would mean that the company is dealing and trading in the best possible products. Reviews from the customers would reveal as to the customers satisfaction level at the price at which the product is being bought. Moreover, proper and timely audits are also definite means of delineating the market for such companies.

Answer (c) : The price support discount scheme by the Government dictated that the Government would participate in the fixation of the minimum amount of price that the companies would charge from the customers (being specific to the oil trading companies). This, however, was not going in line with the protection of the customers rights. The Hellenic competition commission found out that the oil trading companies were not passing on the benefit of the price reduction in the oil market to the customers and were charging the similar price. The price reduction benefit was all being absorbed by these companies. On contradiction, it was found out that these companies could do so , as the price support from the Government was aiding these companies. Therefore, the Hellenic competition Commission had pushed for the total abolishment of the price support discount scheme.

Answer (d) : The Oil Trading industry had developed as one of the largest sectoral industries of the Greece nation by late first decade of the 21^st century. However, the looms of price discrimination and the non-participation of these companies in the overall follow up of the upkeep of the norms in the Oil market had pushed the Government to constitute the Hellenic Competition Commission (HCC) . The commission had very critically explained the current corrupt scenario in the Oil trading market and had adjudged many steps for the total renovation of the spirit of business and in the up keep of the policy norms that govern the business in the oil trading market. The Government had so far not been much involved in the business of such trading companies. However, after the judgement of the Hellenic competition commission, the Government felt the need to intervene more in the process in which these companies operate, as only then it was possible to understand the loopholes in the proper upgradation and the implementation of the customers benefit policies. During the period from 2009 to 2018, some of the stringent measures were undertaken to take out this industry from the clutches of corruption and disintegration. By 2018, there are new path breaking changes that can be observed in the functioning of these firms. These Trading companies now are bound to follow some of the rules of the Government, going by which, they would have to pass on the benefit of the reduction of the oil prices to the customer. Moreover, they have now also formed a commission among themselves and ensure that the prices that are fixed by the commission are being adopted by all the firms in unison so that there is no discrimination with the customers of any of the firms and the price is static and customer friendly. Moreover, it is now seen that these firms are operating in a more free and flexible manner , thereby earning good profit for themselves and the Greece economy.