Commission for Protection of Competition fined Lukoil-Bulgaria over 67 million BGN for abuse of dominant position

The Commission for Protection of Competition on February 17 imposed a pecuniary sanction in the amount of BGN 67 771 454 on Lukoil-Bulgaria for abuse of a dominant position by applying a price pressure against the company's competitors in the wholesale of motor fuels on the territory of the country.

By Decision No. 184/16.02.2023, rendered in Case No. CPC-864/274/2021, the CPC imposed a pecuniary sanction in the amount of BGN 67 771 454 for an infringement committed by Lukoil-Bulgaria EOOD under Article 21 of the Law on Protection of Competition, consisting in an abuse of a dominant position by applying a price pressure to the company's competitors in the wholesale of motor fuels on the territory of the country, which may prevent, restrict or distort competition on the fuel markets and affect the interests of consumers.

The probe was initiated at the request of OMV Bulgaria Ltd. in connection with serious concerns about a breach of competition on the domestic fuel markets by Lukoil Bulgaria Ltd. It was subsequently joined by a request from Insa Oil Ltd and signals from wholesale market participants.

In this respect, the CPC collected a huge amount of information from Lukoil-Bulgaria EOOD, Lukoil Neftohim Burgas AD, the Customs Agency and almost all major traders and fuel stroge depot holders.

Thanks to the timely intervention of the CPC, the targeted strategy of Lukoil-Bulgaria EOOD to gradually take over the wholesale fuel market was prevented. In particular, the company is trying to create the impression that its new pricing policy imposed on retailers in 2021 will lead to lower prices for the end consumer. As such behaviour is well known to the EU antitrust authorities, the CPC considers that in practice the only interest of the dominant enterprise, which Lukoil-Bulgaria Ltd undoubtedly is, is to push its competitors out of the market and in the long term to impose unilaterally higher prices on consumers. In this respect, it should be noted that it is the wholesalers and tax warehousekeepers which are the only ones that could oppose the dominant eneteprise by exerting some competitive pressure in so far as they have the possibility of importing or supplying fuels from alternative refineries.

From the analysis of the vast amount of data collected and analysed, some basic facts could be highlighted:

"Lukoil-Bulgaria EOOD has more than half of the market and is the leader in the wholesale of motor fuels. It is part of the Lukoil Group, which has a unique logistics, warehousing and transport infrastructure with a strategic geographical location and operates along the entire chain from fuel production to its sale to end users.

The Commission found that Lukoil-Bulgaria EOOD had implemented a comprehensive strategy to restrict competition in the wholesale of fuels in the country. Through changes in its pricing policy in 2021, the company has completely abolished the quantity discounts it granted for the wholesale of motor fuels under deferred excise duty regime, while traders purchasing excise duty paid fuels from Lukoil-Bulgaria Ltd's depots received an additional discount. A unilateral pricing policy was applied on the relevant markets, which led to the existence of a so-called 'price pressure'. This infringement is also demonstrated by the tests carried out in accordance with European economic theory and practice. As a result of the price pressure, the dominant enterprise's competitors, which can only influence Lukoil-Bulgaria Ltd's pricing policy, could not effectively oppose in terms of price and this led to customer churn, financial losses and market exit. In addition to eliminating competition, such behaviour also reduces the incentives for potential new traders and investors to enter and expand in the fuel markets, which will ultimately harm end-users. Given the interconnectedness of the wholesale and retail markets for automotive fuels, the increase in wholesale fuel prices due to weakened competitive pressures resulting from the behaviour of Lukoil-Bulgaria Ltd will have an immediate effect on the prices of automotive fuels offered by petrol stations, which is known to be of great socio-economic importance.

As a result of the active actions of the CPC, in the course of the investigation of the proceedings, Lukoil-Bulgaria Ltd. changed and corrected its behaviour, which is the most important objective of the antimonopoly authority, namely to provide protection and conditions for the expansion of competition.

The decision of the Commission may be appealed before the Administrative Court - Sofia Region by the parties and any third party having a legal interest within 14 days.