Market features
OFT is the organization which is aimed at creating the circumstances where the customers are satisfied with the services and the business is fair and competitive (Office of Fair Trading 2010a). Considering the features of the oil market in the world and especially in the United Kingdom, it should be mentioned that the competition in the market is increasing.
To reduce this competition within the market, GB Oil Limited has decided to merge with Brogan Holdings Limited. The increase of the competition was not very profitable for the GB Oils Limited which wanted to monopolize the market. The Brogan Holdings Limited acquisition is one of the ways to reduce the competition and make the oil market more predictable (Completed acquisition by GB Oils Limited of Brogan Holdings Limited 2002).
Possible market failure issues
The completed acquisition of Brogan Holdings Limited by GB Oils Limited has affected the market greatly, especially heating oils and transport fuels markets (Completed acquisition by GB Oils Limited of Brogan Holdings Limited 2002). Moreover, considering the situation from the point of view of Office of Fair Trading, the acquisition resulted in failure “to be referred to Competition Commission” (Office of Fair Trading 2010b).
The current merge could lead to the monopoly in the industry which is considered to be the main market failure (Bagheri 2000, p. 16). A number of actions had been provided to eliminate that failure. One of those is the Highland Fuels purchase of Western Isles business which belongs to Brogan Holdings Limited. Hus, such actions may help reduce the market failure created by the virtual market monopoly and leave the competition in the industry.
Whether the market has failed in any significant way
If to consider the situation without the case where Highland Fuels purchases Western Isles, the market would not be competitive any more. The merge of the greatest oil companies in the country may lead to the market monopolization which will negatively affect the industry.
There is already an idea that “the oil market is one for the gambler” (Moore 2010) in the world. Moreover, the market could fail in a number of other fields different from monopoly, such as imperfect information, political and economic interests, and externalities (Bagheri 2000, pp. 17-21).
Whether there has been or could be a proportionate and effective intervention
Considering the oil industry in the UK, it may be competed that there are a number of different companies which could conduct the same intervention on the market by means of buying other companies. Still, that intervention could not be the same as the oil industry companies’ potentials are rather different.
For example, the acquisition of Brogan Holdings Limited by GB Oils Limited cannot be compared and contrasted with the acquisition of Dana Petroleum plc by the Korea National Oil Corporation in the UK (Office of Fair Trading, 2010c).
References
Bagheri, M., 2000. International contracts and national economic regulation: dispute resolution through international commercial arbitration. Kluwer Law International, 2000.
Completed acquisition by GB Oils Limited of Brogan Holdings Limited, 2002. Office of Fair Trading. Web.
Moore, J., 2010. The oil market is one for the gamble. The Independent. Web.
Office of Fair Trading, 2010. Targeted enforcement and improved capability are priorities in OFT Annual Plan. Web.
Office of Fair Trading, 2010. OFT accepts distribution business sale in heating oils merger. Web.
Office of Fair Trading, 2010. Anticipated acquisition of Dana Petroleum plc by the Korea National Oil Corporation. Web.