Christmas Eve Exemption: Petroleum industry seeks pass from antitrust provisions

south_africaStrategic Timing of Exemption Application?

Flying somewhat under the radar during the Christmas and year-end holiday season (but not under AAT’s radar), the South African Petroleum Industry Association (made up of BP, Shell, Chevron and other oil heavyweights) have sought a five-year renewal of their currently temporary holdover exemption from certain competition laws, which will expire in June 2016.  The application was made on Christmas Eve 2015 under section 10(6)(a) of the Competition Act.  SAPIA has not posted any news item or press release about its application on its web site to date.

SAPIA is seeking permission to allow its members to “cooperate and co-ordinate” on common industry logistics issues, as Andreas Stargard, a director with African competition-law and anti-corruption advisors Pr1merio notes.

“These include areas such as Single Buoy Mooring, port facilities, shipping, mooring, and interestingly also distribution as well as less well-defined ‘production and manufacturing plant shutdowns.'”

As Stargard observes, from an antitrust perspective, this could be of significant interest: production limitations would necessarily decrease available supply and thereby have the potential to drive up price, he notes.  Under the terms of SAPIA’s application, the plant shutdowns are both scheduled and unscheduled and supposedly relate to upgrades and safety measures only, according to the application.  In practice, however, such an exemption could give possibly provide the oil industry with carte blanche on competition issues and market manipulation.

In order to assuage concerns, the SAPIA members agree, in return for the exemption, that:

Competing participants in exempt agreements and practices may not share competitively sensitive information, except for the purposes described in the exemption application.

SAPIA and its members may not share information relating to setting of margins, imposition of levies and or approval of tariffs, unless required to do so by the DOE or NERSA.

The employees of any operating party who receive such information shall ensure that the information is held, maintained and used separately, confidentially and on need- to-know basis only.

The full text of the request for exemption is located here.  Interested parties and the public have 20 business days to comment on the application.

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