TotalEnergies' discount fuel sparks competition complaint in France

TotalEnergies is facing a formal competition complaint from independent retailers and supermarket chains over its gasoline price cap, which has drawn long queues at its stations but angered competitors who say they cannot match the price.

The energy giant capped the price of E10 gasoline at €1.99 per liter five months ago, intermittently, well below the national average of around €2.15 per liter and far under prices of nearly €2.50 in areas including Paris. The cap has cost the company an estimated €250 million to €300 million. Diesel was capped at €2.25 per liter, according to euronews.

TotalEnergies introduced the measure as political pressure mounted for a windfall tax on energy companies. Prime Minister Sébastien Lecornu called on the company in May to put in place "a generous cap." Chief executive Patrick Pouyanné has made clear the cap will be abandoned if a special tax is enacted. "There's nothing forcing us to keep the cap in place," Pouyanné said. "If a tax is introduced, we'll draw our conclusions and TotalEnergies won't have any more price caps."

The cost of the cap has been offset by soaring crude prices. Higher oil prices, driven by the US-Iran war, helped TotalEnergies double its first-half profit to €11.2 billion.

Political pressure mounts

With a presidential election seven months away and France's economic situation worsening, the government is watching carefully. The recent jump in fuel prices has prompted calls for demonstrations reminiscent of the 2018 yellow vest movement, which began as a protest against fuel taxes and escalated into a broader challenge to President Emmanuel Macron's economic policies.

President Macron called on the government Wednesday to address fuel supplies and prices. Government spokeswoman Maud Bregeon noted that roughly one in ten filling stations in France lacked at least one fuel, with the vast majority of them being TotalEnergies stations. She said the government would seek to ensure sufficient supplies and gain regulatory flexibility on refineries. The goal, she said, is "to push prices down as much as possible, or at the very least to keep their increase under control."

Rivals cry foul

The FF3C trade association, representing a thousand independent service stations, lodged a complaint in mid-July with France's competition regulator for unfair competition. "There is an upstream player with a dominant position that takes advantage of it to set very aggressive prices that are below market levels," said FF3C head Jacques Goisque. "We can't sell at a loss."

Supermarkets, which typically sell gasoline at or near cost as a loss leader to attract customers, are also furious. Michel-Edouard Leclerc, head of the leading supermarket chain E.Leclerc, said "refiners are lining their pockets" while retail distributors cannot compete. "We can't go any lower than what our prices are today," he said. "We don't have a cent of margin in our filling stations."

The tension escalated on the island of Corsica, where more than a dozen filling stations closed over the past weekend. "Despite the efforts of our supplier, our purchase price exceeds Total's retail price by several dozen cents," the stations said in a statement. They denounced "the state failing to regulate prices," which "allows an integrated group that benefits from considerable upstream margins to dictate, to blackmail, leading to this distortion of competition."

Goodwill dividend

While the price cap carries financial costs for TotalEnergies, it has burnished the company's public image. TotalEnergies has frequently faced criticism for the low taxes it pays in France relative to its global profits. The cap has "above all earned the company a large amount of goodwill among the French," Pouyanné said recently.

"Today, the public authorities are quite happy a private company is doing the job, perhaps in their place," Goisque said, reflecting a sentiment that the government is tacitly endorsing the cap despite the competitive distortions it creates.