Coles and Woolworths to cease supermarket subsidised fuel discounts

Posted by AFN Staff Writers on 11th December 2013

The Australian Competition and Consumer Commission (ACCC) has accepted undertakings from both Coles and Woolworths supermarket groups that they will each voluntarily cease making fuel saving offers that are wholly or partially funded by any part of their business other their fuel business.

In addition, both supermarket groups have said they will limit fuel discounts that are linked to supermarket purchases to a maximum of 4 cents per litre.

The ACCC has been conducting an investigation into whether fuel saving offers issued by major supermarket chains (sometimes referred to as “shopper dockets”) were causing a substantial lessening of competitions in markets for the retail sale of fuel.

“I welcome the voluntary co-operation of each of Coles and Woolworths in addressing our concerns, particularly as they each maintain that none of their fuel saving offers breaches the Act,” said Rod Sims, the Chairman of the ACCC.

“The ACCC’s investigation was nearing completion and although we had yet to make a decision in the matter, our investigation had caused us to consider the competition effects arising from the fuel saving offers,” Mr Sims said. “We had focussed on the offers by the major supermarket chains of fuel discounts of 8 cents per litre, which were made for sustained periods during 2012 and 2013, and we were concerned that those offers could have longer-term effects on the structure of the retail fuel markets and also short term effect of increasing general pump prices in those markets,” he said.

“We’ve accepted the undertakings because they address the ACCC’s principal competition concerns and allow the matter to be resolved quickly and efficiently,” Mr Sims said.

Some fuel retailers had complained that they could not afford to match the supermarkets’ fuel discounts of 8 cents or more, because those discounts were being funded from markets that were separate and unrelated to the fuel retailing markets. By removing the funding by supermarkets and limiting the supermarket offers to a maximum of 4 cents per litre, the ACCC said it considered that other fuel retailers will be able to compete on a “more level playing field”.

The key aspects of the undertakings include:

Coles and Woolworths may continue to offer fuel savings offers to their supermarket customers, but any discounts on fuel offered to supermarket customers from 1 January 2014 are not to exceed 4 cents per litre
At their service stations, Coles and Woolworths may still offer discounts on fuel (including discounts in excess of 4 cents per litre), but from 1 January 2014, all fuel discounts (including those offered by the supermarkets) must be funded from within their fuel retailing operations (including associated convenience stores and other activities at their service stations)

The ACCC said it remained concerned about any other fuel discount offers funded by non-fuel retailing operations and any other fuel discount offers above 4 cents per litre that were conditional on purchases of goods or services (other than purchases at the petrol outlet). It said it will assess the lawfulness of any such offers made by other parties and take appropriate action to deal with any traders it considered were engaging in anti-competitive conduct.

CHOICE says grocery prices should fall

Consumer group CHOICE has said the undertakings to the ACCC should mean bigger discounts are offered in the supermarket groups’ grocery stores.

“With the millions Coles and Woolworths spend trying to convince consumers there is a real ‘price war’, this is the perfect opportunity to redirect fuel subsidies to the supermarket shelves,” said Tom Godfrey, CHOICE Head of Media. “Anything less will show the supermarkets are not serious about competition, and expose the so-called ‘price wars’ as nothing more than advertising slogans,” he said.

“Coles claims that Australian families value fuel discounts because they help to reduce their weekly shopping bills,” Mr Godfrey said. “Woolworths also claims their customers will no longer benefit,” he said.

CHOICE said the solution is “obvious”: to redirect fuel subsidies to groceries.