Exclusive Distributorship Agreements in the Petrol Industry
| Published date | 01 September 1966 |
| Date | 01 September 1966 |
| Author | Peter G. Whiteman |
| DOI | http://doi.org/10.1111/j.1468-2230.1966.tb02257.x |
EXCLUSIVE DISTRIBUTORSHIP
AGREEMENTS
IN
THE
PETROL INDUSTRY
EXCLUSIVE
dealing agreements between
oil
companies and operators
of filling stations, by which the garage owner agrees
to
sell only
the petrol
of
a
particular oil company, now cover about
96
per cent.
of
all
retail petrol outlets. Although the exact terms
of
a
‘‘
solus
”
agreement vary from company to company, the essential feature of
solus trading consists of
an
undertaking by the retailer to sell
a
particular supplier’s brand or brands of motor fuels exclusively, in
consideration of
a
solus rebate to be allowed by the supplier
on
all
the motor fuels purchased
(“
the tying covenant
”).
Such agree-
ments.also provide for some measure of support to be given to the
products
of
the petrol companies other than motor fuels, particularly
lubricating oils. Invariably, the retailer
also
agrees that he will
procure the acceptance of existing solus obligations by
a
purchaser
on
the sale or transfer of
his
business
(“
the continuity covenant
”),
and that
in
some cases the retailer will give the petrol company
the first refusal to purchase. All petrol companies further stipulate
that the retailer must keep open at reasonable hours and provide
an
efflcient service
(“
thc compulsory trading covenant
”).
The solus system of marketing has recently been considered by
both the Monopolies Commission and the Court of Appeal. The
Monopolies Commission, which reported in July
1966,
came to the
conclusion that the solus system, in principle, does not operate
against the public interest.‘ The three principal reasons for this
conclusion were first, that the solus trading system reduces delivery
costs for petrol, because oil companies
can
deliver to
a
smaller
number of petrol stations, and make deliveries of
a
greater average
size
than would be the case under multi-brand trading. Secondly,
that the
financial
assistance provided by the petrol companies had
enabled garage owners to improve their sites,2 and finally, that the
solus system had neither led to an over-proliferation of petrol
stations or
had
any appreciable effect in restricting the motorists’
freedom to buy the petrol
of
his choice.8 Professor Barna dissented
from the conclusions of the Commission, and indeed the reasoning
of the Commission is questionable.
For
example, the principal
argument advanced by the Commission for holding that solus trading
did not operate against the public interest,
was
that solus marketing
1
The
Monopoliee Commission:
Report
on
the
Supply
of
Petrol to Retailers
in
the
United
Kin
dom,
July
1966
(horeinafter the
Monopolies Commiesion
~eport),
parae.
3b-379.
2
Ibid.
para.
870.
8
Ibid.
parae.
877
and
370.
507
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