This year's SITE Energy Day was devoted to discussing the consequences of oil price fluctuations for markets and actors of the economy. The half-day conference engaged policy-oriented scholars and experts from the business community to discuss the impact of oil price fluctuations on macro fundamentals, international trade, strategies of oil cartels, strategic risk management, and opportunities for change in energy systems. Chloé Le Coq, Assistant Professor at SITE and Stockholm School of Economics and Catarina Marvão, Researcher at SITE-SSE and Trinity College Dublin, gave a presentation "Fuelish” Firms or Clever Retailers? Multimarket contact, collusion and mergers". For more information and research analysis please visit: www.hhs.se/site

1. “FUELISH” OR CLEVER RETAILERS?
- MULTIMARKET CONTACT, COLLUSION AND MERGERS -
CHLOE LE COQ AND CATARINA MARVÃO
SITE-STOCKHOLM SCHOOL OF ECONOMICS
SITE Energy Day November 5, 2015

2. .

3. EVIDENCE
1. Same firms in many oil refining by-products  multimarket contact (MMC) –
technology spillovers
2. Evidence of cartel participation (and reporting)
3. Evidence of mergers with some part of other firms – Consolidation (1998-2002) led
to all these firms being in Forbes Global Top 25, by 2007.
It is easier to sustain collusion with MMC when:
– Different productions costs and markets (Berheim,Whinston, RAND1990)
– Always - Real market imperfections  strictly concave objective f and supergames
interdependent (Spagnolo, 1999)
– Low setup costs, different products (i.e. no possibility of consumer/producer arbitrage)
(Norman, 2003)
Mergers increase MMC
– Mergers can “increase the MMC of sellers and thereby increase their market power”
(Scott, 2008)
WHAT DO WE KNOW?

4. WHAT DO WE KNOW? (CTD.)
There is (always) a threat of deviation of a cartel agreement
Little effect of MMC on collusion : US
radio broadcasting industry
(Waldfogel, Wulf, 2006)
&
Reporting can have a domino effect
in MMC (Heiko, Gerlach, 2009)
MMC and bundling punishments in
cartels (Montero, Johnson, 2012)
US automobile & US airline industries
((Leheyda, 2008; Ciliberto, Williams, 2012)
&
Amnesty Plus may stabilize non-
reported cartels in MMC
(Lefouilli, Roux, 2012)

5. QUESTIONS:
Can mergers facilitate collusion in the presence of
MMC, when there is a threat of reporting?
Can mergers substitute collusion?

6. DATA
– Cartels fined by the EC 1/1996-1/2015
– Mergers with EU impact 1/1975-1/2015
– Acquisitions with EU impact 1/1975-1/2015
– Underestimation issues
– Sample selection bias

7. DETECTED CARTELS (EC) - TIMING
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Rubber Chemicals inv Fine
Hydrogen Peroxid inv Fine
Bitumen Netherlands inv Fine
Methacrylates inv Fine
Butadiene Rubber inv Fine
Bitumen Spain inv Fine
Candle Wax inv Fine

8. Nynas
BP
Bayer
Total
ENI
Shell
Repsol
Akzo

9. DETECTED CARTELS (EC) - MEMBERS
38443
Rubber
Chemicals
38620
Hydrogen
peroxid
38456
Bitumen
Nedtherlands
38645
Methacrylates
38638
Butadiene
Rubber
38710
Bitumen
Spain
39181
Candle
Waxes
BP BP
100% 100%
Total Total Total
30%, €42M €33.75M €128.16M
Shell Shell Shell
€108M €160.88M 100%
Nynäs Nynäs
€13.5M €10.64M
ExxonMobil ExxonMobil
ACCUSED BUT
RETRACTED
7%, €83.59M
Repsol Repsol Repsol
10%, 3.38M 40%, €80.5M €19.8M
Bayer Degussa Degussa Bayer
20%, €58.88M 100% 100% 100%
Akzo (Flexys) Akzo ENI ENI
100% 40%, €25.2M €272.25M €29.12M
+ 2 others + 6 others + 10 others +3 others + 4 others + 2 others + 5 others
Goal: Info exch.EEA P-fix Neth. P-fix EEA Quotas P fix Germany
P-fix EEA+ Limit Q, Monit. P P-fix Spain Exch.info

10. 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
…
2013
2014
2015
M M M 2M
Rubber Chem.
Cartel
Akzo
reports
Fine
Bitumen Spain Cartel
BP
reports
R.Spain-
BP.Spain
Fine
R.-BP:
BGG
Candle wax Cartel
R.YPF-
Shell PT
Shell
reports
Fine
R.-Shell:
Nat gas
REPSOL – CARTELS AND MERGERS

11. SHELL – CARTELS AND MERGERS
1977
…
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Abuse
Dom.
(Exxon,…)
M 4M 4M 3M 7M M 2M M 3M 3M 2M
GFU inv Settle
Bitumen
Netherlands
S-
Exxon
BP
reports
Fine
R.-BP:
PlaneIT
R.-
Kuwait
Italy
Butadiene Rubber
Bayer
reports
Fine
Candle wax
S-
Exxon
R.YPF-
Shell PT
R.Butano-
Shell Glass
Shell
reports
Fine
R.-Shell:
Nat gas

12. WHAT IS IT HAPPENING?
Form
Cartel
(A,B,…)
Report (B) Merger
(A,B)
Form
Cartel
(A,C,…)
Merger
(A,C)
Report (C)
Merger
(A,C)
Form
Cartel 1
(C,D,…)
Form
Cartel 2
(C,D,E...)
Merger
(C,D)
Report
Cartel1(F)
Report
Cartel2(C)
Mergers
(D,E)
(C,F)
Eg.
A=Repsol D=Exxon
B=BP E=ENI
C=Shell F=BP