The competition watchdog is holding up Woolworths’ $1.8 billion sale of its service station network to competitor BP over fears it could see motorists pay more for fuel.

Under the sale announced late last year, BP would take over and rebrand 543 Woolworths fuel and convenience stores, adding to its 350 existing company-run service stations.

The Australian Competition and Consumer Commission on Thursday said it was concerned the sale could substantially lessen competition for retail fuel sales and see petrol prices rise.

The watchdog said it was investigating what impact the sale would have on fuel markets in major cities and on hundreds of local markets, each of which had unique competitive dynamics.

“You can’t just look at a map and say, well, in a three or five kilometre radius there’s five competitors so who cares,” ACCC chairman Rod Sims said.

“You may find that the BP and the Woolworths are on the same side of a very busy freeway and they’ve been competing against each other in significant ways.”

Mr Sims said Woolworths typically priced at a lower end of the market than BP, which might not adopt that pricing strategy when it took over Woolworths’ stores.

BP and Woolworths have signalled they are willing to divest from some sites to get the deal past the ACCC, but Mr Sims said competition issues in the large metropolitan markets would be harder to address.

Analysts have estimated up to 90 Woolworths’ service stations would have to be cut out of the deal to get it passed the ACCC.

Woolworths, which runs its service stations with BP’s competitor Caltex, wants to offload its fuel business to help funds its ongoing supermarket fight with Coles.

BP Australia president Andy Holmes said the retail and fuel market would remain highly competitive even after the merger, and was confident BP and Woolworths could address the ACCC’s concerns.

“We look forward to obtaining clearance at the end of this process,” he said.

Woolworths said it would continue to work with BP and the ACCC to get the deal approved.

BP and Woolworths want to roll out a store model called Metro at BP, which would offer fresh food and other supermarket items supplied by Woolworths at BP service stations.

The British multinational fuel giant has rolled out similar stores in the UK, where it has a partnership with Marks & Spencer, and in Germany, where it has partnered with supermarket chain REWE.

The sale would see BP’s footprint of company-owned stores grow from about 5 per cent of all service stations in Australia to about 13 per cent, which is about the size of competitors Caltex and Coles Express.

There are about 1000 other independent service stations that use the BP brand, which BP says set their own prices and compete with its company-owned sites.

Extracted from Canberra Times.