28
Sep

EG calls for fuel supply deal with Ampol to be overturned after $50m Woolworths payment revealed

Service station chain EG has alleged in the Federal Court that fuel wholesaler Ampol paid Woolworths $50m in a deal that locked it out of sourcing cheaper fuel elsewhere.

The move steps the case up from EG’s initial allegations it had been misled by Ampol, which it alleged had assured the company of long term supply of Caltex-branded fuel, despite being aware of the potential loss of the contract.

The court fight stems from the move by Chevron to pull the right to supply Caltex-branded fuel in 2020, after signing deals to continue use of the brand when EG acquired 534 Woolworths petrol stations.

rior to signing, EG had sought warranty from Ampol to the effect it had the valid licence to use Chevron’s Caltex trade marks until at least July 31 2033.

Ampol had declined to provide the warranty, but had assured EG it had a “long term agreement” and the formal process to drop the Caltex brand in Australia would take years.

However, court documents have shown Ampol had been repeatedly informed of Chevron’s displeasure, with the notice period that allowed the cancellation of the license on the brand dialled back from 48 months to just 30.

In its statement of claim EG alleges Caltex Australia, now known as Ampol, had “failed to disclose” around the time it was negotiating the fuel supply agreement and the trade mark licence deed that Caltex Australia was engaging in a detailed brand review to develop and transition to its own “Ampol” brand. It also alleges that it was likely that Caltex Australia would seek to impose that Ampol brand on to EG during the term of the fuel supply agreement.

EG also claims Ampol had not obtained, nor sought to gain, Chevron’s consent to use the Caltex brand by the time it signed its agreement in 2019.

American fuel giant Chevron ultimately controls the Caltex brand.

EG alleges the document discovery process, initiated after it took the case to the NSW Supreme Court, had revealed Ampol had made “various contracts, arrangements or understandings which had the purpose, effect or likely effect of substantially lessening competition in retail fuel markets” in the wake of the failed sale of Woolworths’ petrol stations to BP.

The sale to BP was blocked after the Australian Competition and Consumer Commission objected.

EG said in its filings: “Following ACCC opposition to the attempted sale by Woolworths of its retail fuel business to BP, and the ensuing likely scenario of entry by an independent retailer capable of exerting significant competitive constraint on retail fuel pricing, Caltex Australia sought to ensure that the Woolworths fuel business would be prevented, hindered or substantially restricted from competing with Caltex Australia (and others) by procuring Woolworths to enter into long-term exclusive supply and associated contracts that were to be novated to any acquirer of Woolworths’ fuel business.”

EG said the deal, which saw Ampol pay Woolworths $50m upfront, locked all its petrol stations into supply deals for 15 years.

EG claims the deal allowed Ampol to supply fuel to its own stations at lower prices and locked in the company from attempting to source fuel at cheaper prices elsewhere.

“Caltex Australia knew that it was likely that Woolworths’ exit would result in an independent retailer owning and operating the fuel business with the ability and incentive to provide effective competitive constraint upon Caltex Australia’s supply of retail fuel in relevant markets,” EG said.

“Caltex Australia knew and intended that by procuring Woolworths to agree to a supply arrangement that was stapled to Woolworths’ sites, the terms of any such agreement could be locked in for a long term and preclude competitive negotiations for wholesale fuel supply with any acquirer of Woolworths’ sites in the near future.”

EG is now seeking the court find the contracts it signed with Ampol “are void or should be varied”.

Extracted from The Australian