Global petroleum giant, Shell, and Easigas have been forced into a remarkable relent from an anti-competitive behaviour in South Africa via as a result of a complaint lodged with the Competition Commission by Puregas.
The Commission announced yesterday that it has accepted the withdrawal of a complaint by Puregas against Shell Downstream for unfair business practices. Puregas had lodged the complaint after it was able to secure a supply agreement on favorable terms.
The Commission’s statement noted that Puregas, a supplier of propellants, lodged a complaint with the Commission against Shell, a manufacturer and supplier of liquefied petroleum gas (LPG) in February this year. In the complaint, Puregas alleges that Shell cancelled its supply contract for propane and butane and that this amounted to an exclusionary act in contravention of the Competition Act.
During its investigation, the Commission found that Shell divested its LPG business to Easigas a few years ago, in terms of which Shell was to exclusively supply LPG to Easigas.
However, nited the Commission, in an effort to comply with the Commission’s recommendation in the LPG Market Inquiry, Shell decided to renegotiate its supply contract with Easigas. In terms of the new contract, effective from February 2018, Shell will exclusively supply 90% of its LPG total production to Easigas and allocate the remainder to small wholesalers in line with the Commission’s recommendations in the LPG Market Inquiry.
The new supply contract means that Puregas would no longer be able to purchase its product requirements directly from Shell as it does not fall within the definition of a small wholesaler as per the LPG Market Inquiry. Puregas was therefore required to purchase its product requirements from Easigas and was concerned that the price it would pay for propane and butane is likely to be higher.
However, Puregas has since submitted that it has managed to secure a supply agreement with Easigas on favourable terms. As such, Puregas has taken a decision to withdraw its complaint against Shell. In light of this, the Commission has accepted the withdrawal and considers the matter as finalised.