The Downstream Oil Protocol – A slippery slope for the future of competition law?

In response to unprecedented demand at the petrol pump, the UK government has activated the Downstream Oil Protocol and suspended competition law for fuel producers and suppliers. 

The Protocol, a measure designed to allow the Government to ‘work constructively with fuel producers, suppliers, hauliers and retailers’, forms part of government preparedness for energy and fuel emergencies. 

Although the fuel crisis has subsided, the decision to temporarily suspend the oil industry from the Competition Act 1998 raises pressing questions about the rule of law in the UK. Does the ability of the government to suspend laws in exceptional circumstances undermine their efficacy? If laws are suspended due to lobbyists or political pressure, what damage does this cause to our laws and the foundations they are built on? 

Competition Law: A Short History 

Under the Competition Act 1998, businesses engaging in ‘anti-competitive behaviour’ (abusing a dominant market position, fixing prices, or sharing sensitive commercial information) risk being fined up to 10% of global turnover and, in the most serious cases, prison sentences for company directors. The act aims to promote competition within the market, ensuring companies innovate and charge consumers a fair price.

Going Downstream 

The ‘public policy exclusion order’ allows the relevant Secretary of State to relax UK competition rules for certain agreements on exceptional public interest grounds. When anti-competitive behaviour is in the public interest, such as coordinating supplies to reduce shortages, the Secretary of State can exclude these industries from the remit of the Competition Act.

This was seen in March 2020 when the rapid spread of COVID-19 caused an escalation in panic-buying. Competition law was relaxed for retailers, allowing them to share data related to stock levels, pool staff together, and share distribution depots and delivery vans.

When faced with another sharp increase in panic buying, this time of petrol and not penne pasta, the government suspended competition law for the oil industry in line with the Downstream Oil Protocol.

A Slippery Slope

For some, suspending competition law to allow the free flow of goods and calm consumer nerves was logical and appropriate. In both circumstances, the country faced extreme supply pressures and the risk of social or political unrest. 

However, as Matthew Hall notes in an article published in The Times, the context surrounding both issues was strikingly different. Suspending retailers from competition law to keep the nation fed, clothed, and watered during the worst public health crisis in a generation starkly contrasts a temporary run on petrol pumps. One could praise the government for acting swiftly to curb growing unrest. 

Nevertheless, we should consider how the suspension of competition law may set a dangerous precedent. Treating competition law as ‘an inconvenience to be set aside quickly at the first hint of a crisis and following some good lobbying’, in Hall’s words, sets the tone for future responses to panicked consumer behaviour. Rather than seeking a facts-based approach and providing British consumers with figures on local stock levels or acting on business warnings about HGV drivers, the government looked to suspend competition law and ask questions later.

The future of competition law?

It worked effectively in this situation, as it did in March 2020. But what about panic ensuing from further Brexit fallout or the climate crisis? In their report on the suspension of competition law, global law firm Simmons and Simmons suggests that the British government might be best placed to collaborate with businesses. In creating a new legal framework in conjunction with business leaders rather than quick fixes, the principle of legal market competition will be protected from further erosion. 

Furthermore, suspending competition law to support the fossil fuel industry and not using the same power to encourage companies to cooperate and reduce greenhouse gas emissions sends a perilous message. As COP26 approaches and leaders fight to maintain the climate targets within the 2015 Paris Agreement, the Downstream Oil Protocol demonstrates the influence that the government could have in order to further its Net Zero goals. Whether the government seeks further quick fixes or creates a more robust legal framework in collaboration with companies remains to be seen.