Competition watchdog extends exemption for petroleum industry

The Competition Commission has again extended an exemption to SA’s petroleum industry to proceed with agreements and practices that would ordinarily constitute cartel conduct.

On Thursday, the commission said the exemption for the industry, as represented by SA Petroleum Industry Association (Sapia), has been extended to June 30 2019. Sapia is a voluntary association whose members consist of major oil companies.

An exemption — written permission by the commission to engage in a prohibited practice — has been in place since 2010, and has been extended a number of times. In terms of the Competition Act, the commission may grant an exemption for certain agreements or practices if it serves to maintain or promote exports.

“Sapia argued that co-ordination of agreements and practices between its members ensured security of supply and thus economic stability of the petroleum industry,” the commission said in a statement. “This co-ordination is facilitated through meetings and information sharing.” 

The scope of the exemption excludes wholesale and retail activities but allows for co-ordinated activities which, the commission said, would ordinarily constitute cartel conduct under Section 4 of the Competition Act. The activities include, among others, the importing of oil and fuel through one facility in Durban; planning refinery shutdowns; supplying fuel to airports through a common facility; and interaction of members on government policy initiatives.  

“The various agreements and practices between competing Sapia members facilitate the exchange of information relating to, among other things, individual firm’s volumes; product grades; stock requirements; costs; production; and capacity constraints,” the commission said.

According to Avhapfani Tshifularo, Sapia executive director, the justification put forward by the industry for the exemption has not changed since the exemption was first granted in 2010.

“We need the exemption because a lot of infrastructure is shared. Anything that affects supply generally requires industry-wide discussion,” Tshifularosaid. When the extension of the exemption expires at the end of June, “I guess there will be another one.” 

He said the industry association has applied for a longer-term extension of the exemption to five years, but still awaits the outcome.

steynl@businesslive.co.za