Watchdog won’t protect retailers from “vigorous competition”

woolworths caltex petrolACCC chairman Rod Sims says recent changes to the Competition and Consumer Act 2010 (CCA) won’t protect retailers from “vigorous competition” and that in competitive markets, some firms prosper while others go out of business.

“This is a harsh reality,” he said speaking at the RBB economics conference yesterday.

“To some this may seem unfair. But it is this process that drives innovation, better business practices and lower prices for all Australians.”

Commenting on suggestions that the arrival of US e-commerce giant Amazon,could be anti-competitive, Sims said in terms of misuse of market power, “if you open a store in a new town and you set a common price point, you are going to lose money initially if you don’t have scale.”

“Eventually if you get your business plan right you will make money at that price point; even if it damages incumbent firms and puts some out of business this is in no way illegal.

“It is hard to see otherwise than that Amazon’s entry into Australia will be good for consumers, despite it not being good for incumbent retailers. Some of these incumbents have called on the ACCC to act against Amazon’s business model.”

Sims said the ACCC’s primary objective in implementing Australia’s competition laws is to protect the competitive process.

“Firms that offer consumers a better deal should be rewarded irrespective of their size.

“Some large firms may feel they are unfairly targeted by our enforcement investigations, but it is predominately large firms with significant market power who have the ability and incentive to interfere with the competitive process.”

Sims also said petrol pricing is one of the “major sources” of discontent in the community.

“A large percentage of the population is convinced they are losing and an ‘oil cartel’ is winning” he said.

“Some see petrol prices increased by, say, 25 cents per litre in a day, unrelated to the cost of fuel; others see the price in their regional town at a significant premium to another town close by.”

“Our message is that consumers are now empowered to choose to avoid purchasing from retailers who are price gouging or otherwise offering uncompetitive prices. It is not hard to time your purchases in the cities to save a lot of money; and in many of the regional towns we have studied there are consistent low-priced players that would welcome more consumers.”

ACCC delays Woolworths, BP deal again

The watchdog also announced it has delayed its decision on BP’s proposed acquisition of Woolworths’ retail service station sites.

The expected new decision date is 14 December 2017.

“This is a significant decision for the retail petrol market in Australia. The extension to the consideration period will allow the ACCC to consider further information from the parties,” Sims said.

“This potential transaction involves complex, extensive data analysis of fuel prices across all fuel sites in Australia over a number of years, and it’s vital we take the time to thoroughly assess its likely impact.”

The ACCC commenced a public review of the proposed acquisition on 15 March 2017. The ACCC released a Statement of Issues outlining preliminary competition concerns on 10 August 2017.

On 28 April 2017, BP lodged applications for authorisation on behalf of itself, Woolworths, and BP Resellers.

On 29 August 2017 the ACCC issued a Draft Determination proposing to grant conditional authorisation to BP. The conditions included that Woolworths and BP offer and comply with a section 87B undertaking acceptable to the ACCC which caps Woolworths’ shopper docket and Woolworths Rewards loyalty program fuel discount offers to 4 cents per litre in total.

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