Amoco Corporation and Société Nationale Elf Aquitaine: A report on the acquisition by Société Nationale Elf Aquitaine of certain assets of the Amoco Corporation

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This reference (see Appendix 1.1) arises out of the acquisition in August 1990 by Elf Oil (GB) Ltd (Elf), a wholly-owned subsidiary of Société Nationale Elf Aquitaine (SNEA), of the downstream assets in the United Kingdom of the Amoco Corporation (Amoco), a United States oil company. SNEA is a large integrated oil company in which the French Government holds 55.6 per cent of the share capital and controls the appointments of the Chairmen and other Board members (other than employee representatives).

The assets acquired included Amoco's 70 per cent share of an oil refinery at Milford Haven, owned jointly with Murco Petroleum Ltd (Murco), some 200 retail petrol stations owned by Amoco, contracts to supply petrol to another 30 independent retail outlets, and interests in pipeline and terminal facilities.

Until the merger, Elf did not itself own a refinery in the United Kingdom, although its parent company is a major refiner in France. Amoco's share of refining output in the United Kingdom was some 2.4 per cent in 1988. Amoco's share of deliveries of petrol to retailers was about 1.8 per cent and its retail network represented 1.4 per cent of all retail petrol outlets. Elf's equivalent shares were 3.1 per cent and 2.3 per cent.

The MMC report on The Supply of Petrol (Cm 972, February 1990) found that the petrol market was competitive, with a number of strong companies, particularly the five majors (Esso, Shell, BP, Texaco and Mobil), having substantial market shares.

The merger has enabled Elf to become an integrated oil company in the United Kingdom but on virtually every measure, both nationally and regionally, its market share of all petroleum products is relatively small, generally being in the 3 to 5 per cent range after the merger. Having regard to the shares of the majors, and the growing importance of hypermarkets as retailers of petrol, Elf is not in a position to exercise market power in the petrol market. Similarly we do not think the shares of Amoco and Elf in other product markets are big enough for the merger to harm competition there. Little concern was expressed to us about the merger's effect on competition.

Although the French Government could potentially influence the strategic policy of SNEA, all the evidence pointed to the company's carrying on business in a normal commercial way. Other parties in the United Kingdom downstream industry view Elf as a normal commercial company and government control is not seen as having a distorting effect. The presence of substantial minority shareholdings (some 44 per cent) and stock exchange quotations in various international markets militate against interference by the French Government. Moreover it seems unlikely that the downstream sector of the United Kingdom petroleum market would be of sufficient strategic importance to it to justify such action. In any case, Elf's position in the market would not be sufficient for such action to have a detrimental effect on the public interest.

The French Government holds 33.9 per cent of the shares, and the right to vote an additional 5 per cent, in Total Compagnie Française des Pétroles (Total CFP), another large oil company. Appointments to Total CFP's Board require government approval. The French Government could therefore potentially influence the policy of Total CFP, although it would be constrained by the fact that a majority of the company's shares are widely held and listed on international stock exchanges. As with SNEA, however, its policy is to leave Total CFP's management to run the business.

Total CFP, like SNEA, has been active in the United Kingdom for many years. Its share of downstream markets is also relatively small, in the range of 4 to 6 per cent. All the evidence pointed to Total CFP's business being conducted commercially, in the same way as any other oil company. There was no evidence that SNEA and Total CFP co-ordinated their activities; on the contrary, the evidence was that they were rivals and seen as such in the market. We do not consider that the merger of Elf's and Amoco's United Kingdom downstream businesses makes it any more likely that the French Government would press SNEA and Total CFP to co-ordinate their activities. Any move towards such co-ordination would in any event be unlikely to be confined to the United Kingdom market and would fall to be considered under applicable competition legislation at the time, both in this country and elsewhere.

We concluded that the merger does not and may not be expected to operate against the public interest.

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