Competition body may target bottled gas sector

Companies supplying bottled gas for domestic use could be facing a Competition Authority investigation, depending on the final outcome of a review of the sector carried out by the monopolies watchdog, it emerged yesterday.

The agency yesterday published the findings of an assessment of the liquid petroleum gas (LPG) market which found that competition has decreased since 1999, a year that marked the beginning of a period of consolidation in the sector.

Two companies, Calor Teoranta and Flogas - owned by publicly-quoted DCC - control 98 per cent of the market. The authority's statement said the level of rivalry between the players did not appear to be "intense".

In addition, it said that exclusive dealer agreements that are common in the sector appeared "to be conducive to facilitating co-ordinated behaviour between the two established firms and may also explain the apparent absence of price competition in the market."

The authority said that it would begin a public consultation on the issue. The statement said that following this process, it could make a declaration limiting the scope of the exclusive dealership agreements.

If it does not make any declaration, The Irish Times understands that it could carry out an investigation of the sector. That could lead to criminal prosecutions of companies and executives. Sources said the chances of it following this route were 50-50.

The review covered 1994 to this year. In 1994, the Competition Authority temporarily banned LPG companies from entering into exclusive dealerships with retailers for longer than two years. Five-year agreements were the norm at the time.

This opened the market up and smaller suppliers began eating into the the two dominant players' share. "The manner in which the market developed between 1994 and 1999 suggests that the movement to two-year exclusive dealer agreements had a positive influence on the level of competition," the authority said yesterday.

According to its figures, in 1998, Blugas had 9 per cent of the market, while other players, including Norgas and Premier, had 7 per cent, limiting the two big operators to 84 per cent of the market.

By 1999, when the ban was lifted, there were several companies in the market. However, a round of consolidation followed the return of five-year exclusive agreements in 1999.

Calor bought Blugas in 1999 and Flogas acquired Norgas in 2001. The following year, Premier Gas stopped operating in this country. This left Calor and Flogas with 98 per cent of the market. The authority's figures show that between 1998 and 2003, Calor grew its share of the market from 52 per cent to 54 per cent.