Coles, Woolworths agree to curb fuel discounts

AUSTRALIA’S two largest supermarket chains, Coles and Woolworths, have agreed to scale back their respective fuel discount offers following concerns the discounts were decreasing competition in the industry.

The Australian Competition and Consumer Commission (ACCC) today accepted undertakings from the two retail giants that they will stop offering fuel discounts (also known as shopper dockets) to consumers that are partly of wholly subsidised by other parts of their business separate from the fuel retailing business.

Coles and Woolworths have also agreed to limit the fuel discounts they offer – which can be as high as eight cents per litre – to no more than 4c per litre.

The ACCC launched an investigation after receiving complaints from other retailers that they could not match the high 8 cents a litre discounts of the two supermarkets as they were funding the discounts through parts of their business unrelated to fuel.

Several retailers complained that this created an uneven playing field and gave Coles and Woolworths an unfair competitive advantage in the marketplace.

The ACC said in a statement that the agreement to remove the funding by supermarkets and reduce the discount to a maximum 4 cents per litre allows other fuel retailers to “compete on a more level playing field”.

ACCC chairman Rod Sims said the agreement by the two retailers came prior to the completion of the investigation, but the Commission accepted the undertaking to allow the matter to be resolved quickly.

“I welcome the voluntary cooperation 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,” he said.

“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.

“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 effects of increasing general pump prices in those markets.” The undertaking states that Coles and Woolworths can continue to offer fuel saving discounts, but all offers from January 1, 2014 cannot exceed 4 cents per litre and must be funded solely from within their fuel retailing business from that date.

The Victorian Automobile Chamber of Commerce (VACC) released a statement supporting the move, after lobbying heavily on behalf of its independent service station owner members to remove the fuel discount offers.

VACC executive director David Purchase congratulated Mr Sims on his “strong leadership” on the matter, but said the Chamber would continue to monitor the two supermarket giants to ensure they do not breach the agreement.

“This agreement comes after considerable VACC pressure, through our members and our public awareness campaigns,” he said.

“We have argued for more Government intervention in cases were big business dominates small business and today’s announcement is a good example of how Government intervention, in this case, through the ACCC, can have a positive outcome.

“However, we do not see today’s news as the end of the issue. VACC will be watching Coles and Woolworths closely to ensure they adhere to the agreement and hope this will create a more open market in which independent fuel retailers can compete.

“If competition diminishes businesses will close and fail and competition will be reduced.”