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Australian regulator to block Woolworths' sale of service stations to BP

The Australian Competition and Consumer Commission said it intends to oppose BP Plc's proposed acquisition of Woolworths Ltd.'s retail service stations, citing concerns over potential fuel price increases.

U.K. oil and gas company BP currently supplies fuel to about 1,400 branded service stations across Australia, setting prices at about 350 of them, according to the regulator. Australia-based Woolworths currently operates 531 service station sites, with another 12 in development.

"BP prices are significantly higher on average than Woolworths prices in the major capital cities," ACCC Chairman Rod Sims said. "BP generally increases prices faster than Woolworths during price-increase phases, and is slower to discount during the price-discounting phase of cycles."

The ACCC believes that if the deal goes through, fuel prices will likely rise at the service stations acquired from Woolworths, which would have "a major impact" on Australian motorists.

"This acquisition will likely affect metropolitan price cycles by making the price jumps quicker, larger and more coordinated. Reduced competition will also mean that prices will not fall as far, or as quickly, in the discounting phase of the cycle," Sims said.

The consumer watchdog's announcement comes after an extended review of the proposed A$1.79 billion deal, which was announced in December 2016.

BP and Woolworths said in separate Dec. 14 statements that they were disappointed by the ACCC's decision.

BP said it believed the transaction "would bring a compelling new offer to Australian consumers that would transform convenience retailing in Australia," while Woolworths said both companies will assess their options going forward.