Last Sunday, the Competition and Markets Authority (CMA) was asked by the Government to conduct “an urgent review of competition in the fuel market“, a request driven by rapidly increasing fuel prices and the seeming lack of any benefit to car owners of the Government’s VAT cut on fuel.

The 7 July deadline for the CMA’s initial report is challenging. The agency will have little time to identify and collect evidence, carry out its analysis and report to the Secretary of State. Perhaps the CMA’s initial report will look more like a progress update and more substantive findings will come later.

The Government’s request is, however, interesting from at least a couple of different perspectives. First, it underlines the CMA’s role as a tool for Government at a time when cost-of-living issues have taken on much greater prominence. We recently suggested that the Government might similarly ask the CMA to review UK children’s nurseries given the increasing importance of childcare costs in many families’ budgets.

Second, the Government’s request that the CMA look at competition in the fuel market comes on the back of it having recently reviewed two major M&A deals in UK petrol forecourts: (i) the acquisition of Asda by TDR Capital and the Issa brothers, the joint owners of EG Group, a major UK fuel retailer; and (ii) the acquisition of Morrisons by the private equity group, Clayton, Dubilier & Rice (CD&R), which owns the UK’s largest fuel retailer, Motor Fuel Group (MFG). The CMA has approved both deals, albeit requiring TDR/Issa to sell 27 petrol stations, and CD&R to sell 87 petrol stations.

In neither review did the CMA find systemic problems with competition in fuel retailing. The agency’s concerns revolved around the deals’ potential effects on competition in small numbers of local markets.

Since the Asda deal, however, analysis reported by The Times has suggested a softening of competition in fuel retailing. Historically, Asda has been the fuel market’s price leader, passing lower wholesale fuel prices on to consumers faster than anyone else. But, Asda’s new private-equity owners may not have the same aggressive approach, and this could be affecting competitive dynamics in the sector as a whole. If this is true, the CMA could find itself in the challenging position of having approved a deal that has had some difficult outcomes for consumers.

Moreover, given the role of private equity in these deals, fuel could be added to calls for greater antitrust scrutiny of private equity (as per FTC Chair, Lina Khan’s recent remarks to the Financial Times), and to suggestions by those, such as academic economist Diane Coyle, who say that the CMA may need to pay more attention to the business models of firms making acquisitions.

(Stijn Huijts of Geradin Partners has written this excellent explainer on some of the, perhaps not very well articulated, concerns about antitrust and private equity.)

Our sense is that it is unlikely that the CMA will conclude that the Asda deal has been instrumental in contributing to higher UK fuel prices. However, the CMA may well, as a result of this review, start paying more attention to private-equity firm’s business strategies in merger control cases. It will certainly be something for those involved in M&A to look out for.