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Duopoly to limit fuel discounts

 

296753_4441The days of big shopper docket fuel savings are over after Coles and Woolworths agreed to limit discounts to four cents a litre.

The Australian Competition and Consumer Commission (ACCC) on Friday announced the two supermarket giants had agreed to the four cent a litre maximum discount limit.

Coles and Woolworths have also agreed to stop funding the discounts through their supermarkets division and any future discounting will need to be covered by their fuel retailing business.

The Chairman of the ACCC, Rod Sims, said he welcomed the voluntary cooperation of each of Coles and Woolworths in addressing the watchdog’s concerns, particularly as they each maintain that none of their fuel saving offers breaches the act.

“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,” Sims said.

“We had focused on the offers by the major supermarket chains of fuel discounts of eight 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 effects of increasing general pump prices in those markets.

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

Ian McLeod, MD of Coles, said the supermarket firmly believes there was no breach in law from any of its fuel discount offers but has recognised the concern expressed by the ACCC that there could be adverse competition effects over time and has worked constructively with the ACCC to finally resolve the matter.

“Coles has worked hard to lower both the cost of a weekly shopping basket and provide better value at the fuel pump and we are pleased that the four cents per litre docket discount will remain in place for our customers,” McLeod said.

“But Coles has agreed to address the concern that larger discounts could adversely affect competition over time and from 1 January 2014 Coles will no longer offer any fuel discounts above the four cents per litre to supermarket customers.”

McLeod said fuel retailing was a very competitive market with low profit margins and low barriers to entry and that movements in global oil prices and government taxes continued to be the primary drivers of the retail fuel price.

“ACCC reports show that that the global oil price and government taxes make up 88 per cent of the retail petrol price and that the net profit margin in the fuel industry is very low compared to other industry sectors,” McLeod said.
The four cent a litre limit for offers to supermarket customers will apply from January 1.

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