The Australian Competition and Consumer Commission (ACCC) has hit out at the current fuel discount war being waged by the Coles-Woolworths duopoly.
ACCC Chairman Rod Sims expressed “significant concern” about the practice, while addressing the Australian Institute of Company Directors’ Leaders Edge Lunch in Melbourne.
“The ACCC has previously signalled its concerns about the impact of shopper docket petrol discounts by Coles and Woolworths on the competitive process,” Mr Sims said.
“Our concerns have been intensified by the expanded use of shopper docket and other discounts by both Coles and Woolworths recently. These have varied in level of discount, frequency and duration, and have now reached up to 45 cents per litre.”
Mr Sims added that the short-term benefit to consumers provided by the large discounts on fuel would be outweighed by the long-term damage to competition in the market, as smaller operators were unable to compete.
Lower discount rates could also have a long-term impact on competition within the fuel market, Mr Sims said.
“Even at the level of eight cents, it would be difficult to see how an unsubsidised fuel retailer could compete on a sustainable basis. Now, the discounts are substantially higher,” Mr Sims said.
“If Coles and Woolworths wish to offer their customers a discount, it should be off supermarket products, not petrol."
“The ACCC believes this activity is likely to have a negative effect on competition in the petrol industry. Over time, higher petrol prices could be the result."
Often criticised for being a ‘toothless tiger’, Mr Sims stated that the ACCC had no power to ban shopper docket discounts but was currently undertaking an investigation, which started last year.
"The ACCC is investigating whether the duration, frequency and extent of these fuel offers may have an adverse impact on the underlying level of fuel prices, particularly in circumstances where fuel retailers who would otherwise compete for price conscious customers are unable to do so."
“The ACCC has no power to ban shopper dockets offers. As an enforcement body, however, the ACCC can investigate market activity and, where appropriate, take court action seeking injunctions to stop the conduct and seeking penalties in appropriate cases.”
The ACCC hopes to release the findings from its investigation in the next few months.
Meanwhile, the Australian Automobile Association (AAA) has weighed into the debate, with Executive Director Andrew McKellar saying that motorists have woken up to the dangers of mass discounting on fuel.
“Motorists are smarter than the supermarkets think they are and realise that excessive discounting is hurting competition,” Mr McKellar said.
“Let’s not kid anyone, supermarkets are not offering fuel discounts as a measure of goodwill or charity, they will be making up the profit elsewhere in their business.”
Mr McKellar also said that the nation’s peak motoring bodies have been raising these concerns for some time, and that the federal government needed to ensure the ACCC had the power to act on Mr Sims concerns.