EC, April 12, 2006, No 38.348

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 1-2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (1), in particular Article 9(1) thereof, Having regard to the Commission Decision of 16 June 2004 to initiate proceedings in this case, Having regard to the Commission's preliminary assessment of 16 June 2004, Having given interested third parties the opportunity to submit their observations (2) pursuant to Article 27(4) of Regulation (EC) No 1-2003 (3), After consulting the Advisory Committee on Restrictive Practices and Dominant Positions, Having regard to the final report of the Hearing Officer, Whereas:

SUBJECT MATTER

(1) This Decision is addressed to Repsol Comercial de Productos Petroliferos SA (hereafter "Repsol CPP"). The subject matter of the procedure is the supply of fuel to service stations in Spain. In its preliminary assessment, the Commission considered that the conclusion with service stations of long-term exclusive supply agreements raised concerns under Article 81 of the EC Treaty, which applies inter alia to vertical agreements that foreclose markets.

PARTY

(2) Repsol CPP, incorporated in Madrid, Spain, is a company belonging to the Repsol- YPF oil group. In Europe, this group is active mainly in Spain and in Portugal. It possesses, among other things, substantial refining capacity in Spain. Repsol CPP is active mainly in the distribution of fuel, lubricants and other similar products for motor vehicles in Spain. In its preliminary assessment, the Commission considered that non-compete clauses on fuel distribution concluded between Repsol CCP and its respective contractual partners raised a concern under Article 81 of the EC Treaty, which prohibits all agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, in that such clauses may give rise to a possible foreclosure of third party competitors on the fuel retail market in Spain.

INVESTIGATED PRACTICES

(3) The investigated practices arise from agreements concluded by Repsol CCP for the exclusive purchase of motor fuels by service station operators in Spain. The contractual partners of Repsol CPP in this respect are mostly family businesses which seldom operate more than one service station. There are eight different types of agreement depending, on the one hand, on the type of tenure of the service station and, on the other hand, on the nature of the commercial relationship between Repsol CPP and the service station operator. The different types of agreements are the following:

(a) The "Codo-agent" agreement. Agreement for the distribution of fuel through service stations owned by Repsol CPP, the operator of which is a tenant. The operator has the status of agent.

(b) The "Codo-retailer" agreement. Agreement for the distribution of fuel through service stations owned by Repsol CPP, the operator of which is a tenant. The operator has the status of reseller.

(c) The "Dodo-agent" agreement. Agreement for the distribution of fuel through service stations owned by their operators. The operator has the status of agent.

(d) The "Dodo-retailer" agreement. Agreement for the distribution of fuel through service stations owned by their operators. The operator has the status of reseller.

(e) The "Usufruct-agent" agreement. Agreement between Repsol CPP and the owner of a service station by which the owner grants Repsol CPP a right in rem to the usufruct. As usufructuary, Repsol CPP simultaneously leases the service station to the bare owner or to a third party linked to the bare owner for the purposes of its operation. Upon expiry of the agreement, the bare owner automatically recovers full ownership of the service station. The transfer is accompanied by a fuel distribution agreement. The operator has the status of agent.

(f) The "Usufruct-retailer" agreement. Agreement between Repsol CPP and the owner of a service station by which the owner grants Repsol CPP a right in rem to the usufruct. As usufructuary, Repsol CPP simultaneously leases the service station to the bare owner or to a third party linked to the bare owner for the purposes of its operation. Upon expiry of the agreement, the bare owner automatically recovers full ownership of the service station. The transfer is accompanied by a fuel distribution agreement. The operator has the status of reseller.

(g) The "Tenancy-agent" agreement. Agreement between Repsol CPP and the owner of a plot of land by which the owner grants a tenancy right to Repsol CPP, which becomes owner of any existing or future buildings while its contractual partner retains ownership of the land. As owner of the buildings, Repsol CPP simultaneously leases the service station to the owner of the land or to a third party linked to the owner of the land for the purposes of its operation. Upon expiry of the agreement, the owner of the land automatically takes over ownership of the buildings. The transfer is accompanied by a fuel distribution agreement. The operator has the status of agent.

(h) The "Tenancy-retailer" agreement. Agreement between Repsol CPP and the owner of a plot of land by which the owner grants a tenancy right to Repsol CPP, which becomes owner of any existing or future buildings while its contractual partner retains ownership of the land. As owner of the buildings, Repsol CPP simultaneously leases the service station to the owner of the land or to a third party linked to the owner of the land for the purposes of its operation. Upon expiry of the agreement, the owner of the land automatically takes over ownership of the buildings. The transfer is accompanied by a fuel distribution agreement. The operator has the status of reseller.

(4) In many cases, involving especially agreements of the types referred to at (e), (f), (g) and (h), Repsol CPP assumes all or part of the cost of building or renovating the service stations.

PROCEDURAL STEPS UNDER REGULATION NO 17-62 AND REGULATION NO 1-2003

(5) On 20 December 2001, under Articles 2 and 4 of Council Regulation No 17 of 6 February 1962, (4) Repsol CPP applied to the Commission for negative clearance or, failing this, an individual exemption under Article 81(3) EC in respect of the agreements and/or model contracts laying down the conditions under which it carried on or intended to carry on its business of distributing fuel for motor vehicles through service stations in Spain.

(6) On 19 March 2002, the Commission published in the Official Journal a notice inviting interested third parties to submit their comments on the notification (5). With the entry into force of Regulation (EC) No 1-2003 on 1 May 2004, the application made by Repsol CPP lapsed in accordance with Article 34(1) of that Regulation

(7) On 16 June 2004, the Commission opened proceedings with a view to adopting a decision under Chapter III of Regulation (EC) No 1-2003.

(8) On 16 June 2004, the Commission adopted, and subsequently addressed to Repsol CPP, a preliminary assessment of this case under Article 9(1) of Regulation (EC) No 1-2003

(9) On 27 June 2004, Repsol CPP submitted commitment proposals to the Commission in response to the preliminary assessment.

(10) On 20 October 2004, the Commission published a notice pursuant to Article 27(4) of Regulation (EC) No 1-2003, (6) inviting interested third parties to submit observations they might have within one month following the publication date.

(11) On 7 March 2005, the Commission informed Repsol CPP of the observations received from interested third parties following the publication of the notice. On 12 April 2005 Repsol CPP submitted a first amended commitment proposal, which it subsequently revised several times. A final amended commitment proposal was submitted on 13 March 2006.

PRELIMINARY ASSESSMENT

A.1. Relevant markets

The product market

(12) Fuel sold in Spain includes two main categories: diesel and petrol. Diesel outsells petrol, accounting for approximately 80% of total consumption of fuel. Fuel sold in Spain comes mainly from Spanish refineries. The balance is imported by tanker. Spain is a net importer of diesel and a net exporter of petrol.

(13) Domestically produced products are generally shipped using bulk transport facilities (pipelines, trains or ships) to local depots (primary logistics), whence they are transported by lorry to their final destination (secondary logistics). Imported products are either unloaded in depots at ports, which may or may not be connected to bulk transport facilities, or unloaded in the refinery and then transported in the same way as domestically produced products.

(14) Fuel, whether produced by a refinery or imported, is either fed into the retail sales network of the producer or importer (composed of company-owned or affiliated service stations) or sold wholesale (off-network) to: (i) independent retailers who are not integrated upstream (unbranded service stations or supermarkets), (ii) traders (including large oil companies not vertically integrated in Spain), or (iii) large final customers (industrial and commercial users such as hospitals, car-hire companies, transport undertakings, factories, etc.). Products may, moreover, be exchanged between refiners or operators at all levels of the chain.

(15) Retail sales involve sales to motorists through service stations (whether branded or not). There are broadly three categories of service station: (i) service stations owned or supplied by vertically integrated oil companies; (ii) independent service stations; and (iii) supermarkets. The types of fuel sold in Spanish service stations are: 98 octane unleaded petrol, 95 octane unleaded petrol, 97 octane lead replacement petrol, "A" diesel (motor cars) and "B" diesel (agricultural vehicles).

(16) Petrol is sold primarily to final consumers on a retail basis, while a substantial proportion of diesel, and in particular "B" diesel, sales are made off-network.

(17) In earlier decisions (7), the Commission considered that the off-network (or wholesale) selling of fuel and the retail selling of fuel through service stations could constitute different product markets. In the case of off-network selling, it considered that there was a separate product market for each type of fuel.

(18) In its preliminary assessment, the Commission did not conclude on the relevant product markets. Given that the competition concern identified in the preliminary assessment would also relate to a market aggregating all fuel types and both off network and on-network sales, the question whether the market should be narrowed down to the different channels and fuel types is left open for the purpose of this decision.

The geographic market

(19) In earlier decisions (8), the Commission considered that markets could be local or national. In its preliminary assessment, the Commission did not conclude on the relevant geographic market. Given that the competition concern identified in the preliminary assessment would also relate to a national market, the question whether the market should be narrowed down to local areas is left open for the purpose of this decision.

A.2. Practice raising concerns

(20) In the preliminary view of the Commission, the investigated practices raised the concern that the non-compete clauses for fuel might, by virtue of all such agreements in their economic and legal context, give rise to foreclosure of the market.

(21) In its preliminary assessment, the Commission noted that the distribution agreements between Repsol CPP and service station operators contained non-compete clauses covering fuel intended for sale through service stations. The clauses, which did not cover any other products sold through service stations, were contained in 1,430 agreements of the Codo type, 770 of the Dodo type and 460 of the usufruct or tenancy type. The duration of the clauses varied. In agreements of the Codo or Dodo type, it was as a rule five years. In agreements of the usufruct or tenancy type, it ranged from 25 to 40 years depending on the type of agreement.

(22) The Commission, in its preliminary assessment, considered that such agreements may, depending on the circumstances, give rise to a competition problem, notably where, by virtue of such clauses, other suppliers in the market cannot sell to the buyers concerned, which may foreclose the market (exclusion of other suppliers by raising barriers to entry) and weaken inter-brand competition. In this respect, in the preliminary view of the Commission, it was immaterial whether service station operators are described in the agreements as agents or retailers.

(23) Still in its preliminary assessment, the Commission considered thus that the non-compete clauses in the agreements in question, and in particular in the agreements of the Dodo, tenancy and usufruct type, might help significantly to create a foreclosure effect on the fuel retail market in Spain. Having regard to the economic and legal context of these agreements, the Commission noted that the market was accessible only with difficulty by competitors wishing to enter it or increase their market share there. This was due notably to the significant vertical integration of operators, the cumulative effect of the parallel networks of vertical restraints, difficulties in setting up an alternative network and other competitive conditions (principally the saturation of the market and the nature of the product).

(24) In its preliminary assessment, the Commission took the view that the agreements in question might contribute significantly to the foreclosure effect produced by all such agreements in their economic and legal context. This was a result of the following factors: the extent of the non-compete obligations imposed by Repsol CPP (the tied market share of Repsol CPP's sales was deemed considerable, at around [25-35%]); the non-compete commitments entered into were of substantial duration, especially in the case of agreements of the usufruct or tenancy type, which are long-term agreements (between 25 and 40 years); and service station operators and final customers were deemed to be in a weak, fragmented position compared with suppliers, in particular Repsol CPP, which has a substantial market share, as already indicated.

A.3. Effect on Trade between EC Member States

(25) According to established case law, agreements like the ones in question, can, because they apply over the whole territory of a Member State, have by their nature the effect of reinforcing the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about. (9) This would be all the more so in the present case where the possible restrictions of competition would create a barrier to entry.

COMMITMENTS PROPOSED ON 21 JUNE 2004

(26) On 21 June 2004, Repsol CPP submitted an initial set of commitments within the meaning of Article 9(1) of Regulation (EC) No 1-2003.

(27) The commitments include provisions on the possibility for service stations to terminate long-term contracts, on a moratorium on supply contracts of a duration exceeding five years, on a moratorium on purchases of stations not supplied by Repsol CPP, and on freedom of discounts by service stations.

A.4. Possibility for service stations to terminate long-term contracts

(28) In order to address the concern identified by the Commission as regards market foreclosure, Repsol CPP proposed to offer to those service station operators who have granted it a temporary right in rem (in the form of a usufruct or tenancy) in the service station and have at the same time become temporary lessees (via an "exchange of contracts") the possibility of "buying back" the right in rem before the scheduled expiry of the agreement. This option could in principle have been exercised at any time from 1 January 2005 onwards provided the agreement has no more than 12 years left to run. The exercise of the option would involve paying Repsol CPP compensation equal to the value of the right in rem in question. The value was to be calculated on the basis of Repsol CPP's annual cash flow and the contract period still to run. Hence the value did not correspond to the residual value of the investment. In the event of disagreement about the compensation, the valuation criteria laid down in the Spanish law on expropriation would apply.

(29) Repsol CPP also offered to advertise in advance the expiry of fuel distribution agreements with service stations and the option to terminate early agreements involving rights in rem. This advertising would take the form of a communication to the Ministry for Economic Affairs which would make it public via the internet, or, failing this, a publication by Repsol CPP on the internet. It would be effected during the first month of each quarter for the following quarter.

A.5. Moratorium on contracts of a duration exceeding five years

(30) As regards new contracts, Repsol CPP proposed to observe a five-year maximum duration for new fuel distribution agreements with the operators of service stations of which Repsol CPP is not the owner.

A.6. Moratorium on purchases of stations not supplied by Repsol CPP

(31) In addition, Repsol CPP proposed that, during a period ending on 31 December 2006, it would not buy outright from their operators existing service stations (Dodo-type stations) which are not supplied by Repsol CPP, i.e., which are not tied to its network.

A.7. Freedom of discounts by service stations

(32) The commitments proposed by Repsol CPP also include a provision stating that stations would be free to grant discounts on the recommended price, whether they be agents or resellers.

A.8. Implementation

(33) Repsol CPP proposed to apply the commitments during a period ending on 31 May 2010.

(34) Repsol CPP also proposed that a third party (independent auditor) verify compliance by Repsol CPP with the commitments entered into. The independent auditor would have to draw up annual reports to the Commission.

COMMISSION NOTICE PURSUANT TO ARTICLE 27(4) AND AMENDED COMMITMENTS

(35) In response to the publication, on 20 October 2004, of the notice pursuant to Article 27(4) of Regulation (EC) No 1-2003 in this case, the Commission received 25 observations from interested third parties, essentially associations or groups of service stations as well as some individual service stations. The observations received agreed with the preliminary analysis of the market and of the position of Repsol CPP. As regards the preliminary assessment, the observations which were found relevant are presented in recitals (36) to 38.

(36) Some observations submitted that service stations which were qualified as "agents" in their contracts were not real agents and that service stations were in practice not able to grant discounts (10).

(37) Some observations agreed with the preliminary assessment of the Commission regarding possible foreclosure but expressed the view that the possibility to exit longterm contracts might be ineffective, because the price to be paid would render exit economically uninteresting.

(38) Some observations agreed with the preliminary assessment of the Commission regarding possible foreclosure but argued that the number of stations tied to Repsol CPP contestable every year would be lower than what was announced in the commitments proposal.

(39) The observations concerning the possible foreclosure concern, and notably the compensation to be paid to Repsol CPP, together with the Commission's own analysis, led the Commission to request amendments to the proposed commitments. Further, given the time needed to amend the commitments, the date of the commitment presented in paragraph (31) had to be extended.

(40) On 12 April 2005 Repsol CPP submitted a first amended commitment proposal, which it subsequently revised several times. The final amended commitment proposal was made on 13 March 2006, duly taking the relevant identified issues into account.

CONCLUSION

(41) On 13 March 2006, Repsol CPP confirmed that the commitments in respect of the agreements, as reproduced in the Annex, shall be construed as commitments within the meaning of Article 9(1) of Regulation (EC) No 1-2003. The commitments are an amended version of the commitments put out to public consultation in the Article 27(4) of Regulation (EC) No 1-2003 Notice and have been offered by Repsol CPP to meet the concern expressed to it by the Commission in its preliminary assessment. The Commission can therefore proceed to adopt a Decision pursuant to Article 9 of Regulation (EC) No 1-2003.

(42) By adopting a decision pursuant to Article 9(1) of Regulation (EC) No 1-2003, the Commission makes commitments, offered by the undertakings concerned to meet the Commission's concerns expressed in its preliminary assessment, binding upon them. Recital (13) of the preamble to Regulation (EC) No 1-2003 states that such a decision should not conclude whether or not there has been or still is an infringement. The Commission's assessment of whether the commitments offered are sufficient to meet its concerns is based on its preliminary assessment, representing the preliminary view of the Commission based on the underlying investigation and analysis, and the observations received from third parties following the publication of a notice pursuant to Article 27(4) of Regulation (EC) No 1-2003.

(43) In this case, the Commission's concern regarding the practices identified in the preliminary assessment was that certain non-competition clauses on fuel distribution may give rise to a possible foreclosure of third party competitors on the fuel retail market in Spain, possibly leading to less downward pressure on prices. The observations received from third parties following the publication of the notice pursuant to Article 27(4) of Regulation (EC) No 1-2003 were not such as to make the Commission reconsider its concern.

(44) In its proposed commitments, Repsol CPP has undertaken to modify its market conduct in a number of ways. The Commission considers that the commitments offered on 13 March 2006 are sufficient to address the concern identified in its preliminary assessment.

a) First, Repsol CPP undertakes to offer to concerned service stations a concrete financial incentive to terminate the existing long-term supply agreements. In practice, stations which are now supplied under long-term "usufruct" and "tenancy" contracts by Repsol CPP will be able to exit these contracts to sign Dodo contracts with any supplier. Stations will have a concrete financial incentive to do so because Dodo contracts provide much larger margins and, through the financial mechanism put in place by the commitments, stations will thus increase substantially their margins per litre. The commitments are further adjusted to make sure that stations will be able to choose their supplier on the basis of the merits of the Dodo offers that they receive from the various wholesale suppliers operating in the market. Stations will thus be able to switch.

b) Second, Repsol CPP undertakes to refrain from concluding further long-term exclusivity agreements. In other words, Repsol CPP will not be able to compensate the effects of the first commitment by tying-in other stations.

c) Third, Repsol CPP undertakes to refrain from buying independent Dodo stations that it is not supplying. In other words, Repsol CPP will not be able to compensate the effects of the first commitment by turning independent Dodo stations into its own Codo stations.

d) All in all, the commitments will give an opportunity for all service stations supplied by Repsol CPP but not owned by CPP to switch to any other supplier, including to a new entrant, and will prevent Repsol CPP from tying-in more service stations. In the preliminary assessment these practices were considered to make it more difficult for third parties to compete on the merits and try to supply the same service stations.

(45) In addition, the Commission notes that the issues raised by third parties other than the concern identified in the preliminary assessment are being addressed by the National Competition Authorities.

(46) In the light of the commitments offered, the Commission considers that there are no longer grounds for action on its part and that, without prejudice to Article 9(2) of Regulation (EC) No 1-2003, the proceedings in this case should therefore be brought to an end.

(47) This Decision should apply from the date on which it is notified to Repsol CPP until 31 December 2011. The present Decision is limited to the period which is reasonably sufficient to deploy the effects of the commitments on competition in the markets.

(48) The Commission retains full discretion to investigate and open proceedings under Article 81 of the EC Treaty as regards practices that are not the subject-matter of this Decision.

Has adopted this decision:

Article 1

The commitments as listed in the Annex shall be binding on Repsol Comercial de Productos Petroliferos, SA.

Article 2

The proceedings in the present case shall be brought to an end.

Article 3

The Decision shall apply from the date on which it is notified to the undertaking referred to in Article 4 until 31 December 2011.

Article 4

This Decision is addressed to:

Repsol CPP Paseo de la Castellana 278-280 E-28046 Madrid Spain

Notes:

1 OJ L 1, 4.1.2003, p.1, as amended by Regulation (EC) No 411-2004 (OJ L68, 8.3.2004, p.1)

2 OJ C 258, 20.10.2004, p. 7.

3 OJ L1, 04.01.2003, p.1.

4 First Regulation implementing Articles 85 and 86 of the Treaty, OJ 13, 21.2.1962, p. 204-62, regulation as last amended by Regulation (EC) No 1216-1999 (OJ L 148, 15.6.1999, p.5)]

5 OJ C 70, 19.3.2002, p. 29. In response to the invitation, 69 comments were received from interested third parties, some on behalf of several service stations.

6 OJ C 258, 20.10.2004, p.7.

7 Commission Decision of 29 September 1999 declaring a concentration to be compatible with the common market (Case No COMP/M.1383 - Exxon/Mobil), paragraphs 428 to 439; and Commission Decision of 9 February 2000 declaring a concentration to be compatible with the common market (Case No COMP/M.1628 TotalFina/Elf), paragraphs 22 to 29.

8 Commission Decision of 29 September 1999 declaring a concentration to be compatible with the common market (Case No COMP/M.1383 - Exxon/Mobil), paragraphs 443 to 444; and Commission Decision of 9 February 2000 declaring a concentration to be compatible with the common market (Case No COMP/M.1628 TotalFina/Elf), paragraphs 30 to 37.

9 See Case C-309-99 Wouters [2002] ECR-I, paragraph 95.

10 Arguments and factual issues submitted in that respect had not been submitted to the Commission when it made its preliminary assessment and would thus require further analysis to confirm whether some stations can be considered as "agents" and whether stations are able to grant discounts. That being said, the submissions referred also to a national competition procedure 490-00, where the "Tribunal de Defensa de la Competencia", concluded on 11 July 2001 that so-called "agency contracts" concluded between some service stations and Repsol CPP were in fact not real "agency contracts" and that the fact that Repsol CPP was fixing the price was illegal. The national court concluded by requesting Repsol CPP to stop fixing the price in all contracts with similar characteristics. The implementation is being monitored by the "Servicio de Defensa de la Competencia".

ANNEX

UNDERTAKING

Case COMP/38.348/B-1 - Repsol C.P.P.

COMMITMENTS TO THE EUROPEAN COMMISSION

Repsol Comercial de Productos Petrolíferos SA undertakes vis-à-vis the Commission to comply with the commitments set out below in relation to the conclusion of Case COMP/B- 1/38348 - Repsol CPP. The commitments will take effect from the date on which the decision pursuant to Article 9 of Regulation (EC) No 1-2003 is notified to Repsol Comercial de Productos Petrolíferos SA and notified, bringing Case COMP/B-1/38348-Repsol CPP to an end and making the said commitments, which were offered to meet the concerns expressed to it by the Commission in its preliminary assessment, binding on the Company.

The commitments, and all the correspondence, memoranda and other documents relating thereto, in no way imply admission by the Company that an infringement of Article 81 or 82 of the EC Treaty has taken place or still exists in relation to the Commission proceedings in Case COMP/E-3/38348 Repsol CPP initiated in response to the notification by the Company of the agreements laying down the conditions in which the Company carries on the business of distributing fuel for motor vehicles through service stations in Spain.

(A) DEFINITIONS

"Commission" means the European Commission.

"Commitments" means the commitments given by Repsol Comercial de Productos Petrolíferos SA to the Commission and set out in sections (B) and (C) of this document, including the definitions listed in section (A).

"Duration of the commitments" means the period beginning on the date of entry into force of the commitments in accordance with the first paragraph of this document and ending on 31 December 2011.

"The Company" means Repsol Comercial de Productos Petrolíferos SA and any other company belonging to the same business group.

A "purchaser" is the bare owner/operator of a service station which buys back the right in rem in the form of a usufruct or tenancy right that the Company holds in the station.

(B) COMMITMENTS

1. Compliance with provisions of Regulation (EC) No 2790-1999 The Company undertakes to comply with the provisions contained in Articles 4 and 5 of Regulation (EC) No 2790-1999 in relation to the agreements laying down the conditions under which the Company carries on the business of distributing fuel for motor vehicles through service stations in Spain. In particular, the Company undertakes to:

(a) refrain from entering into agreements containing any direct or indirect no-compete clause of indefinite duration or of a duration exceeding five years. A no-compete clause that is tacitly renewable after a period of five years will be regarded as being of indefinite duration. Nevertheless, this five-year limit will not apply where the contract goods or services are sold by the purchaser or by a commission-earning agent on premises and land which is owned by the Company or leased by it from third parties unconnected with the purchaser or agent, provided that the duration of the no-compete clause does not exceed the period of occupation of the premises and land by the purchaser or agent;

(b) refrain from restricting the purchaser's ability to determine the selling price, although the Company may impose maximum selling prices or recommend a selling price, provided that these are not tantamount to a fixed or minimum selling price as a result of pressure brought to bear or incentives offered by either of the parties; or, in the case of agency agreements, where the Company determines the selling price since the agent does not become the owner of the goods, refrain from preventing the agent sharing his commission with the customer and from imposing any restrictions on him in this connection, allowing the agent complete freedom to lower the price actually paid by the customer without reducing the Company's revenue as principal.

2. Increase in the number of service stations able to switch supplier each year The Company undertakes to offer the bare owners/operators of service stations in which it holds a right in rem in the form of a usufruct or tenancy the possibility to buy back the right, at any time in the 12 years before the established date of expiry or from 1 January 2010, whichever is the earlier, by purchasing it at a given price. Any supply agreement binding the parties and containing no-compete clauses would automatically be terminated at the time of such purchase.

The price will consist, as the purchaser chooses, either of an annual fee for the remaining life of the redeemed right (with a maximum of 16 years starting from the year of buy-back, if the remaining life is greater), calculated as set out in the following paragraph, or a single fee calculated by capitalising at 8% the annual fee corresponding to the year of buy-back or purchase of the right in accordance with the following paragraph, depending on the redeemed right's remaining period of validity (with the same maximum of 16 years as indicated above, if that period of validity is longer).

The annual fee to be paid each calendar year of the remaining life of the right, or to be used to calculate by means of capitalisation the single payment to be made at the start, in accordance with the preceding paragraph, will be obtained by applying the following formula:

C = R + (60% Di x V)

Where

C is the fee to be paid by the purchaser each calendar year

R is the net lease rental which the purchaser would have had to pay Repsol as lessee, in the year of the buy-back or purchase, if the latter had not taken place

Di is, for each calendar year, the difference, in weighted average value by volume, for the three calendar years prior to the year in question, between the values MD and

M U/S (MD - M U/S), in which:

MD is 70% of the margin (the sentence is normally clear it is equal to PVPthe transfer price) earned on each litre of fuel sold by the operators of service stations reselling the Company's fuels, on the basis of a transfer price indexed to the Platts quotation under a Dodo-type agreement. Nevertheless, if, before the period allowed for exercise of the buy-back option begins, the service station concerned receives from the Company, at the same time as the letter reminding it of that option, an offer of a Dodo agreement displaying the features indicated, the value of MD to be taken will be 100% of the margin per litre resulting from that offer, by reference to the average of the Platts quotations and the prices recommended by Repsol for the three calendar years prior to the year in question, irrespective of whether or not the offer is accepted by the service station within the period in which it is kept open, which may not be less than one year, and of any other offers that may be made subsequently. Where the margin resulting from Repsol's offer exceeds €64/m3, in the case of service stations with average sales in the three calendar years prior to buy-back of between 0 and 1,999 m3; or €67/m3 in the case of service stations with average sales in the same period of between 2,000 and 3,999 m3; or €73/m3 for average sales in the same period of between 4,000 and 5,999 m3; or €74/m3 for average sales in the same period of between 6,000 and 9,999 m3; or €75/m3 for average sales in the same period of 10,000 m3 or more, the value of MD will, however, be taken as the value of the maximum limit indicated for the service stations in each band of sales volumes, related to each litre of fuel;

M U/S is the average margin or commission explained at the end of the paragraph earned on each litre of fuel sold by the service station operators with tenancy or usufruct agreements to whom this commitment relates or, if the specific margin or commission individually earned by the service station concerned, for the year in which the buy-back option is exercised, is greater than the average margin or commission, the said individual margin or commission at the time of buy-back, increased, for each calendar year, at the same rate at which the average margin or commission of the universe of service stations operating under tenancy or usufruct agreements has increased since the year of buy-back. The margin or commission earned on each litre of fuel sold means, for this purpose, the total unit remuneration of any nature obtained by the service station operators with tenancy or usufruct agreements from the sale of fuels, including, where appropriate, additional discounts or commissions or other sales incentives paid by the supplier.

To calculate the margins or commissions to be considered, the reference of the retail selling price recommended by the Company in the relevant periods will be taken, and all the values used will be subject to checking by the auditor approved by the Commission

V is the annual average volume, expressed in litres, of the sales of fuel at the service station in the three calendar years prior to the year of buy-back or purchase.

However, where the service station points out, in any year, that the average volume of such sales in the three years prior to the year in question is more than 10% lower than the average in the three years prior to buy-back, the lower volume will be taken if the service station so requests. For the lower volume to be taken into account, the fall in sales will have to be established by documentary evidence and confirmed by the auditor approved by the Commission, following checks on volumes supplied by any operators, tax documents and records, tank registers and petrol pump totalisers and any other documents or records concerning the service station's business. For the purposes of calculating the average volumes, account will not be taken of any service station closure periods or downtimes.

In cases where the bare owner of the service station is receiving a periodic fee from the Company by way of remuneration for the usufruct or tenancy stipulated in the instrument establishing that right, which is no longer received as a result of buy-back of the right, the annual value of that fee in the year of buy-back or purchase will be deducted from the result arrived at by applying the above formula in order to obtain the actual annual buy-back fee to be paid. Where, in calculating the fee for the usufruct or tenancy or the lease rental to be taken into account in accordance with the preceding paragraphs, sales volumes for the period in question have to be used, the average for the preceding three years will be taken.

Where the buy-back or purchase price takes the form of an annual fee, the contract will stipulate as a condition subsequent that may be entered in the Property Register any failure to pay the fee after more than three months' delay. The condition subsequent may be waived if the service station lodges a first-call bank guarantee providing surety for payment of all the successive outstanding annual fees.

A pro-rata fee corresponding to the part of the calendar quarter that has not yet elapsed on the date the buy-back is formally concluded will be paid at the time of such conclusion. In respect of subsequent calendar quarters and years, the fee will be paid in quarterly instalments and will be invoiced by the Company at quarterly intervals once all the necessary data relating to preceding years are available. Payment must be made not later than the 15th of the second month in the quarter concerned or the 20th day following the date of issue of the corresponding invoice if that is later.

Any notarial and registration fees and taxes (tax on authenticated documents) arising from the conclusion and registration of the condition subsequent which the service station has to pay will be advanced by the Company, if the service station so requests, in which case an interest rate equal to the one stipulated in the commitments for capitalising the annual fee will be applied. The amount advanced by the Company will be reimbursed, within not more than five years from the date the deed is drawn up, by means of instalments paid within the time limits laid down for payment of the fee in the preceding paragraph.

Notwithstanding the foregoing, the purchaser may voluntarily opt, at any time, to reach an agreement with the Company setting a different price for the purchase.

The Company undertakes to send a letter describing the buy-back option to all service stations affected by this commitment within 30 days following the entry into force of the commitments.

The Company also undertakes to send a letter reminding the service stations concerned by this commitment of this option at least three months before the date from which it may be exercised. This letter will inform the service stations of the necessary details for exercise of the buy-back option, where appropriate, without including any item of information that could involve a restriction of competition. At the same time as this reminder letter, but in a separate letter dispatched before the starting date of the period allowed for exercising the buy-back or purchase option, the Company may decide to send the service station an offer of a Dodo agreement with a transfer price indexed to the Platts quotation for the purposes set out in the definition of MD in the formula for calculating the buy-back or purchase price. If such an offer is made, it will at the same time be communicated to the auditor approved by the Commission.

The letters referred to in the preceding two paragraphs will comply with a model previously submitted to the Commission-approved auditor for approval and in respect of which the latter has not raised any objection on the ground that the information provided is insufficient or involves a restriction of competition.

In order to allow completion of the preparations necessary for all those service stations for which the twelve-year period before established expiry of the usufruct or tenancy begins to run before the date these commitments enter into force, or begins within three months after that date, it will be deemed that the option to buy back or purchase the right in question may be exercised once three months have elapsed after the date the commitments enter into force. Letters to the service stations falling into this category will be dispatched not later than 30 days following the entry into force of the commitments or, if the final appointment of the auditor were to take place more than 15 days after that date, within 15 days of such appointment.

The list of service stations concerned by this commitment is given, save inadvertent errors or omissions, in the Annex to these commitments see explanation on confidentiality issues in the e-mail of 03.03.2006. The list contains the name, address and identification number of the service stations. Of those service stations, and in accordance with the rule laid down in this commitment, two hundred and eighty-seven (287) may exercise the option of buying back the usufruct or tenancy from 2006; fifty-one (51) from 2007; forty-eight (48) from 2008; forty-one (41) from 2009; and sixty-three (63) from 2010. Any service station which, in accordance with a subsequent court judgment or for any other reason, falls within the scope of the present commitment No 2, as set out in the first paragraph thereof, will be deemed for the appropriate purposes to be included in the list of service stations concerned.

3. Restrictions on the purchase of certain service stations

The Company undertakes to refrain, during a period ending on 31 December 2007, from acquiring ownership of service stations previously owned outright by the retailers operating them (Dodo-type stations) and which it was not supplying (stations not tied to its network).

4. Moratorium on new long-term contracts

The Company undertakes to refrain, over the duration of the commitments, from entering into any new agreements containing any direct or indirect no-compete clause of a duration exceeding five years where the contract goods or services are sold by the purchaser or by a commission-earning agent on premises and land transferred to the supplier by the purchaser or agent or by third parties linked to the purchaser or agent.

5. Advertising of expiry of contracts

The Company undertakes to advertise in advance: (a) the expiry of its branding agreements (exclusive supply agreements with service station owners); (b) the expiry of agreements involving rights in rem in the form of a usufruct or tenancy; (c) the option to terminate in advance agreements involving rights in rem in the form of a usufruct or tenancy.

The advertising will take the form of a communication by the Company to the Spanish Ministry of Economic Affairs or Industry for publication on its service stations web page. The communication will be made during the first month in each calendar quarter for the agreements expiring or buy-back options arising in the following quarter. If the Ministry does not publish the notice, the Company will do so on its own website, in each case by the end of the second month in each quarter in respect of the following quarter.

6. Renewal of contracts

The Company undertakes to refrain from exerting pressure on service stations with a view to obtaining the renewal of exclusive purchasing or exclusive agency and branding agreements tying them to the Company.

(C) GENERAL PROVISIONS

1. Duration

The Company undertakes to comply with the commitments throughout the duration thereof

2. Publication

The Company undertakes to publish the version of the commitments in Spanish on its website within ten days of their entry into force. The Company will also publish the Trustee Mandate and the Trustee's contact details as soon as they are available.. The Company will inform the Commission in advance of the timing and place of publication.

3. Third-party monitor/independent auditor

Without prejudice to the Commission's powers of investigation under Council Regulation (EC) No 1-2003, the Company agrees to appoint a Trustee to carry out the monitoring of the Commitments provided herein in accordance with the provisions set out in the Annex, which forms an integral part of these Commitments. The implementation provisions regarding the Trustee, as set out in the Annex, as well as the Trustee Mandate are subject to the Commission's approval.

Madrid, 14 March 2006 (signed) Company Secretary (countersigned) Chairman of the Board of Directors

ANNEX I

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ANNEX II

Implementation provisions regarding the Trustee

I. Appointment Procedure

1. The Company shall appoint a Trustee to carry out the monitoring of the Commitments provided herein.

2. The Trustee shall be independent of both service stations which fall within the scope of the present commitment No 2 (hereafter "service stations") and the Company (and be different from either company's current external auditors), possess the necessary qualifications to carry out its Mandate and shall neither have nor become exposed to a conflict of interest. The Trustee may not be employed by either the "service stations" or the Company until after the expiry of a three-year period following the end of this Trustee Mandate.

Proposal by the Parties

3. No later than 15 days after the entry into force of the commitments, The Company shall submit a list of one or more legal entities (including, in particular, international auditing firms) whom the Company proposes to appoint as Trustee to the Commission for approval. The proposal shall contain sufficient information for the Commission to verify that the proposed Trustee fulfils the requirements set out in point I.2 and shall include:

(a) the full terms of the proposed Mandate, which shall include all provisions necessary to enable the Trustee to fulfil its duties under these Commitments;

(b) the outline of a work plan which describes how the Trustee intends to carry out its assigned tasks;

(c) an indication whether the proposed Trustee will appoint an expert to fulfil its assigned tasks;

(d) a detailed explanation why the Company considers the proposed Trustee to be independent and possessing the necessary qualifications. Any on-going or previous activities for the "service stations" and The Company should be reported.

Approval or rejection by the Commission

4. The Commission shall have the discretion to approve or reject the proposed Trustee(s) and to approve the proposed Mandate subject to any modifications it deems necessary for the Trustee to fulfil its obligations. If only one legal entity is approved, the Company shall appoint the legal entity concerned as Trustee, in accordance with the Mandate approved by the Commission. If more than one legal entity is approved, the Company shall be free to choose the Trustee to be appointed from among the legal entities approved including by way of a competitive tender. The Trustee shall be appointed within two weeks of the Commission's approval, in accordance with the Mandate approved by the Commission.

New proposal by the Parties

5. If all the proposed Trustees are rejected, the Company shall submit the names of at least two legal entities within one week of being informed of the rejection, in accordance with the requirements and the procedure set out in points I.2 and I.4.

Trustee nominated by the Commission

6. If all further proposed Trustees are rejected by the Commission, the Commission shall nominate a Trustee, whom the Company shall appoint, in accordance with a Trustee Mandate approved by the Commission.

II. Functions of the Trustee

1. The Trustee shall assume its specified duties in order to monitor the Company's compliance with the Commitments. The Commission may, on its own initiative or at the request of the Trustee or the Company, give any reasonable instructions to the Trustee in order for it to monitor compliance with the Commitments provided herein in the fulfilment of its duties as Trustee.

Duties and obligations of the Monitoring Trustee

2. The Trustee shall:

(i) each year conduct such inquiries as are reasonably required to enable it to render the report required by Clause II(2)(iii);

(ii) on any other occasion, at the request of the Commission or at its own discretion, conduct such inquiries as are reasonably required to enable it to render the report required by Clause II(2)(iv);

(iii) provide to the Commission, a written report once a year, no later than 30 March of each year, commencing in 2007 until 2012. An interim report will be made during the first year of implementation of the commitments no later than 16 October 2006. The reports shall cover the detailed implementation of the Commitments as set out in clauses of Section B and clause C.2 of these Commitments.

(iv) In addition to these yearly reports, the Trustee shall promptly report in writing to the Commission if it concludes on reasonable grounds that the Company is failing to comply with these Commitments.

(v) The Trustee will give to the Company an opportunity to submit observations, within a reasonable delay, on whatever incident that it identifies as regards the compliance with the commitments, before informing the Commission, and will take into account these observations in so far as they are acceptable.

3. The Commission shall, promptly following its review of any report received under Clause II(2)(iii) or (iv), send the Company a non-confidential version of such report.

4. The Trustee is bound to respect the confidentiality of all information provided to it or obtained by it in the course of the exercise of its Mandate. This obligation shall not prevent the Trustee from providing all such information to the Commission. This obligation remains valid after the expiry of its Mandate as long as the information remains commercially sensitive, such information remaining commercially sensitive unless otherwise agreed to by the Company and "the service stations".

III. Duties and obligations of the Company

1. The Trustee and any support that it may reasonably require shall be remunerated by the Company in a way that does not impede the independent and effective fulfilment of its Mandate.

2. The Company shall provide the Trustee with all such cooperation, assistance and information as the Trustee may reasonably require to perform its tasks. The Trustee shall have full and complete access (subject to reasonable notice) to any of the Company's books, records, documents, management or other personnel, facilities, sites and technical information, save for legally privileged advice, as the Trustee might reasonably require for the fulfilment of its duties under the Commitments and the Company shall provide the Trustee upon request with copies of any such document etc. The Company shall make available to the Trustee one or more offices on their premises and shall be available for meetings in order to provide the Trustee with all information as is reasonably necessary for the performance of its tasks.

3. The Company shall provide the Trustee with all managerial and administrative support that it may reasonably request.

4. At the expense of the Company, the Trustee may appoint experts, subject to the Company's approval (such approval not to be unreasonably withheld or delayed) if the Trustee considers the appointment of such experts to be reasonably necessary or appropriate for the performance of its tasks under the Mandate, provided that any fees and other expenses incurred by the Trustee are reasonable. Should the Company refuse to approve the experts proposed by the Trustee, the Commission may approve the appointment of such experts instead, after having heard the Company.

IV. Replacement, discharge and reappointment of the Trustee

1. If the Trustee ceases to perform its functions under the Commitments or for any other good cause, including the exposure of the Trustee to a conflict of interest:

(a) the Commission may, after hearing the Trustee, require the Company to replace the Trustee; or

(b) the Company, with the prior approval of the Commission, may replace the Trustee.

2. If the Trustee is removed according to point IV.1, the Trustee may be required to continue in its function until a new Trustee is in place to whom the Trustee has effected a full hand over of all relevant information. The new Trustee shall be appointed in accordance with the procedure referred to in Section I.