ACCC set to make petrol more expensive

The competition regulator is poised to announce a deal this afternoon over the fuel shopper docket schemes offered by supermarket chains Coles and Woolworths that will see a price cap on discounts expected to be at 4 cents per litre.

The Australian Competition and Consumer Commission is set to announce that it has forged a deal with Coles and Woolworths that will see an end to the cross subsidisation of their supermarket stores over to their petrol stations.

The cap on shopper docket fuel offers is expected to be at 4 cents per litre. At its peak supermarkets were offering discounts of up to 45 cents per litre off fuel prices.

From the Australian Financial Review.
Simply astonishing.

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55 Responses to ACCC set to make petrol more expensive

  1. Rabz

    Why are these useless, tax hoovering numpties so obsessed with petrol dockets?

    FFS, it’s like some bizarre form of monomania.

  2. Grumbles

    Let’s be honest, government intervention ALWAYS results in higher prices or subsidized prices (subsidized by the tax payer so they may as well be higher prices). There are no examples of Government intervention in private enterprise resulting in a better deal for consumers.

  3. stackja

    ACCC

    forged a deal with Coles and Woolworths

    Forgery?

  4. .

    This would be done to please no one but inner city greens and hard left ALP voters without cars and have no capacity or ability to produce their own food.

    If they want cheaper food, stop eating organic handcrafted bacon and egg rolls with rocket and tomato salsa on brioche for breakfast.

    Why they want a single mum from Penrith to pay for their indulgences is unknown but it is downright entitled and divisive.

  5. entropy

    Well it would please service station operators in competition with Coles and woollies. They get to charge more too.

  6. Oh come on

    Scum.

    Actually it wouldn’t surprise me if Coles and Woolies were all too keen to cooperate – apparently the petrol price wars have been eating into their margins. I’m sure they’re thrilled that the ACCC is forcing them not to compete – now they can’t accused of price fixing.

    You’d expect the ACCC to be prosecuting “resale price maintenance”, not organising it.

  7. ar

    ACCC should add another C – for cheaper… might remind them what competition is about…

  8. Badjack

    Oh come on…….Coles and Woolies were not losing out with their petrol dockets. The cost was being subsidised by large companies like CCA.

  9. Mr Rusty

    Competition can only ever be successful when there is equality of opportunity and any commercial tall poppies are only successful because they cheated which indicates the market needs readjusting and that is precisely the raison d’etre of the ACCC.
    Or am I being cynical?

  10. Art Vandelay

    The Australian Competition and Consumer Commission is set to announce that it has forged a deal with Coles and Woolworths that will see an end to the cross subsidisation of their supermarket stores over to their petrol stations.

    This sounds like collusion to me. Where’s the competition regulator when you need them? Oh, right…

  11. wreckage

    Next up: and end to cross subsidisation of canned goods over to fresh food, resulting in an Australia-wide shift to over-processed garbage, proving that people cannot manage their own diets, resulting in the need for a Federation-wide Nutrition Commission to set both prices and food intakes per household.

  12. Oh come on

    Oh come on…….Coles and Woolies were not losing out with their petrol dockets. The cost was being subsidised by large companies like CCA.

    How so?

  13. Jim Rose

    Sinclair, rising prices are evidence of market power, price cuts are predatory, and stable prices is evidence of price fixing

  14. Sinclair Davidson

    Jim – yes, I understand.

  15. Raider580

    Coles and Woolworths should never have been allowed to gain control of petrol . Where were the useless ACCC then .Theres a saving the Gov could make, Chop.

  16. Snirtus

    Get a grip you people!
    The fuel discounts come out of the margins of the fresh food suppliers who have little market power.
    It doesn’t cost Coles & Woolies anything.
    It’s one thing to be Libertarian another to be blind by ideology!

  17. Oh come on

    Why on earth not, Raider580? Do you have any evidence that retail margins on fuel are higher today than they were before the Coles-Shell/Woolies-Caltex tieups and the docket discounting era?

  18. Oh come on

    The fuel discounts come out of the margins of the fresh food suppliers who have little market power.
    It doesn’t cost Coles & Woolies anything.

    Prove it.

  19. Oh come on

    So what we’re to understand is that, as a result of this ACCC-led antitrust exercise, supplier margins are going to increase?

    Ummm…

  20. Mike of Marion

    The ACCC bastards want this petrol discounting to end so that returns to shareholders will be greater so the government gets more tax revenue.

    ACCC doesn’t seem be in a great hurry to stop the LPG price gouging going on at the moment.

  21. Dorothy

    We, in part have Alan Jones of 2GB for this, he has harangued TA and others on these petrol discounts for years!! Next thing we know this government will completely abolish all Coal Seam Gas drilling !!!

  22. Here in the US (Arizona) we have a super market called Fry’s (part of Kroger’s, I believe) that gives you $.10/gal off for each $100 in grocery purchases in one month. We are limited to 35 US gallons and unused points expire the second month (e.g., October’s points expire December 1st). The best we have done is $.70/gal reduction, but it’s not easy to get the whole 35 gallons! You can choose to use only part of the credit on any given visit. I have seen people pull up with what appear to be 50-gallon drums.

  23. Brian of Moorabbin

    The Australian Greens have called on Prime Minister Tony Abbott to ‘muster the courage’ to ban all new Coles and Woolworths supermarkets.

    They also want the big supermarket chains banned from investing in agricultural land, and for the struggling Australian Competition and Consumer Commission’s funding to be doubled.

    Mr Abbott has written to the states and territories outlining his plan for the first independent review into national competition policy in 20 years.

    But Greens Senator Peter Whish-Wilson said the last thing Australia needs is another ‘talk-fest’ on competition policy with no results.

    For a review to be successful, he said, Mr Abbott would need to stop his ‘love-in’ with big business and address the needs of farmers and small businesses.

    Just like the ALP-Greens government under Julia Gillard did, eh Senator?

    Of course, the most ludicrous part of the whole story is that lead sentence.

    Yes let’s ban all new supermarkets…. and then wonder why people in the increasingly spreading outer suburbs have to drive so far to buy their food (obviously they would then see that result as a ploy by Big Oil).

  24. Jim Rose

    Competition laws protect consumers from the scourge of lower prices

  25. Riverina Matt

    The fuel discounts come out of the margins of the fresh food suppliers who have little market power

    So now that the fuel discounts have been reduced, Woolies and Coles are suddenly going to return these margins to their suppliers? Ha! All the ACCC has done is transfer wealth from customers to shareholders and nothing will change for the suppliers. If Coles and Woolies did this for any other product it would be called collusion!

    Supermarkets will continue to do what they have always done, screw suppliers down. And that is a good thing – good for shareholders and good for customers. After all, cheap groceries benefit us all.

  26. Riverina Matt

    The Australian Greens have called on Prime Minister Tony Abbott to ‘muster the courage’ to ban all new Coles and Woolworths supermarkets.

    That’s a popular policy, I’m sure … FMD.

    Hippy communes like Maleny aside, there is not one medium size town in Australia that wouldn’t welcome one of the big 2 supermarkets in a heartbeat. And the greens want to take it off them.

    The Greens – dedicated to making every Australian poorer in every way possible.

  27. Pyrmonter

    @ Jim Rose – but are they able to overcome the very real barriers to entry embedded in our land use planning laws? I doubt it. In which case, interventions to decrease the extent of product bundling may, albeit indirectly, result in lower overall prices. As an inner city organic bacon consumer without a motor vehicle I’ve long wondered why I was offered useless “discount” vouchers; it may or may not relate to the lack of meaningful competition in the grocery market.

  28. Michaelc58

    Sure i want cheaper petrol and saying 8c is no good, but 4c is OK seems illogical, but what is your argument, Sinclair? That there is no such thing as predatory pricing? That this discount is too small to harm non-supermarket outlets.

    What if Coles and Woolworths decided to discount by 50%, sell petrol at 70c a litre and jack up food prices for a while – perhaps of their house brands. Would it be OK if they acquire the petrol retail market all for themselves?

    I am not sure if you say there is a place for ACCC, and if there is, what is it?

  29. Grumbles

    Michaelc58, ACCC should be regulating competition… You can buy both your groceries and petrol from companies other than Coles and Woolworths. Competition exists and there is no evidence of collusion or price fixing, hence no role for the ACCC. As there has been evidence of Monopolies and price fixing in the economy obviously there is a place for the ACCC, but they are trying to make themselves more relevant (the goal of any Government funded agency).

    Further this whole scheme ignores that Coles and Woolies are in competition with each other, and that keeps prices down.

  30. tomix

    Hippy communes like Maleny aside, there is not one medium size town in Australia that wouldn’t welcome one of the big 2 supermarkets in a heartbeat

    That’s right, but Maleny isn’t a good example. That IGA up there would be the best supermarket i’ve ever been in.

  31. Oh come on

    Michael: who cares about non-supermarket outlets? If they can’t compete, they need to get out of the game.

  32. I am the Walrus, koo koo k'choo

    They had to destroy competition in order to save it.

  33. Jack

    Unbelievable. Current ACCC has fetish to favour suppliers over retailers, because Coles and Woollies are competing hard and consumers have beebread benefiting from lower prices. Lots of squealing from MEtcash as well who charge up to 30% more for food and would no doubt like less competition. Big turnaround on last ACCC regime who was looking out for consume, not suppliers.

  34. Chris M

    I have seen people pull up with what appear to be 50-gallon drums.

    That would be me, kind of a doomsday-prepper of fuel. I’ve gotten many Coles 40cpl discounts and always max out the full 150 litres of gaias sweet nectar saving me $60 a time. Oh well, their groceries are way overpriced anyway, I’m just hanging out for Costco and Aldi to open here so I can dump them.

  35. Ripper

    Silly decision , they should just ban the cross subsidisation, If they want to sell groceries and fuel , then they sell both on their own merits.

  36. Gab

    ACCC – ensuring consumers will pay more.

  37. Paridell

    I know I have paid less with the dockets than I would have without them.

    And the Coles and Woolies price war has benefited the Paridell budget no end. I am glad of it since I have promised Peewhit to intervene to prevent the next big sell-off to foreign interests.

    But is all this good for Australia? Is a puzzlement!

  38. wreckage

    What if Coles and Woolworths decided to discount by 50%, sell petrol at 70c a litre and jack up food prices for a while – perhaps of their house brands. Would it be OK if they acquire the petrol retail market all for themselves?

    Yes, absolutely, assuming they do not collude or fix prices. Because people will stop buying food there.

    But there’s no way they’re going to loss-lead to capture the retail petrol market, because the margins there are garbage, the competition is stiff, and barriers to entry are negligible; to retain control they would have to also dominate wholesale fuel, since there’s literally nothing stopping people from filling up at a depot rather than a servo. So then Coles and Woolworths would have to muscle the big oil companies out of Australia. Are you starting to see where I’m going with this?

    The idea that a Coles-Woollies oligopoly is going to take over the Australian energy market is pretty much the only logical conclusion, and it’s patently nuts.

  39. Oh come on

    Silly decision , they should just ban the cross subsidisation, If they want to sell groceries and fuel , then they sell both on their own merits.

    Alternatively, why don’t the likes of you fuck off and let people run their businesses how they choose?

  40. blogstrop

    I shop happily at Coles or Woolies for the food, regardless of the discount. Woolies meat and deli sections are usually the better of the two, but there are store to store variations. The four cents on its own is nothing. But add it to the sixteen cents fluctuations and you have a net 20 cents saved. That’s ten dollars per 50 litres – if you catch the troughs and not the peaks.

  41. dd

    Silly decision , they should just ban the cross subsidisation, If they want to sell groceries and fuel , then they sell both on their own merits.

    No, they shouldn’t.
    I like my fuel dockets thanks very much.
    Coles likes my fuel docket.
    The guy at the petrol station likes my fuel docket.
    Get the hell out of my private transactions with privately run businesses.

  42. Mike of Marion

    In SA LPG is 90 cents per litre. Gouging at its finest and no the ACCC wouldn’t be interested. Premier Weatherall couldn’t care a hoot as he gets the extra GST to blow on arty farty stuff or fancy sails on the Adelaide Oval.

  43. Kingsley

    I’d like to see a good answer to michaelc58 . I’m a big fan of this site but on this issue there seems to be a blind spot on the existence of predatory pricing and second order effects. Likewise on overseas subsidies being used against Aussie business receiving no subsidy. It seems people on this site are in favour of short term competition and long term competitive market structure be damned.
    There are some seriously bright minds on this site so I am probably about to get roasted alive but I’d still like to see the answer.

  44. wreckage

    The short answer is that dropping subsidies usually works to the overall benefit of all even in the presence of subsidised competition. Subsidised competition usually falls into two categories: so little it is not significant, and so much it cannot be thwarted. The same tends to hold for trade barriers: using “we’ll drop ours if you drop yours” is politically expedient and dropping both is better, but dropping ours still benefits us, as I’ll note below.

    In either case, effectively, a foreign government is spending its treasure to make things cheaper for the Australian consumer. In either case, a tiny economy like Australia cannot afford to try to bludgeon the foreign economy into submission, even if there was a net benefit , which there is not.

    There is no predatory pricing happening here, and even if there was (to reiterate: there isn’t), Woolies and Coles cannot hope to create a cartel over fuel sales, so there is no threat to the system. Cross subsidies from their grocery arms would be laughably inadequate to make that happen unless there is already cartel behaviour in the groceries market, which the ACCC has not asserted.

    Supermarkets have already squeezed out a portion of the grocery market, simply by being cheaper and much more convenient (ie., cheaper again, with the money value of time). Markets change over time. Perhaps petrol will end up being sold largely by grocers, as it was in the 1920′s. Businesses will need to adjust.

  45. JohnA

    wreckage #1100893, posted on December 6, 2013 at 11:47 pm

    …there’s literally nothing stopping people from filling up at a depot rather than a servo.

    Nothing except that the fixed Terminal Gate Price they would be charged at the depot is greater than the servo’s bowser price.

    Nothing except that the depot probably doesn’t have convenient facilities like a low-flow-rate dispensing pump, or EFTPOS for payment.

    Nothing except that the depot probably has a minimum quantity of 1000L.

    The depots are geared to servicing tankers which deliver to servos, not cars with 50L tanks.

  46. wreckage

    In rural areas many depots also retail. Already happens. It’s not hard to organise, and with automated pumps EFTPOS is available 24/7 and requires no extra staff. I am saying that the barrier to entry is close to non-existent, which means no market dominance. It takes an eftpos machine, a few meters of hose, and a bowser. The necessary equipment clocks in at a couple of grand if you just sell it straight out of bulk storage and manually bill the customer via eftpos. 1000L fuel-rated tanks can be obtained cheaply, fuel-rated hose is cheap and readily available, and in-line meters are very easy to obtain. There are some regulatory hurdles; that’s neither here nor there, they exist purely at the discretion of the government.

    If there is a fixed gate price to prevent competition with the oil co’s own retailers, how long after the WCO (woollies coles oligopoly) becomes a threat do you think that policy will change? If the fixed gate price is government enforced, then that is its own problem. Even so, WCO still can’t increase its prices over the fixed gate price, or the price that any given transport fleet can plug in an eftpos system and sell its fuel stock to the public, after buying it in depot-sized lots. Again, this already happens.

    Regardless, this is a minor point. You’re arguing that maybe, possibly, at some time in the future, WCO is going to jack fuel prices up. Right now they’re pushing them down, and there are none of the conditions needed to establish or maintain oligopoly now or in the future. There are also no allegations of actual predatory pricing, price fixing, or collusion.

    Finally, as I’ve pointed out, fuel always used to be sold by mixed businesses. If the market again shifts in that direction, we have to prevent that because…? Nobody stopped the servos from out-competing the corner stores and general merchants. Who do we stop from competing, how far back do we wind the clock? And cross-subsidisation? Most fuel sellers make most of their actual profits out of hot food. Are we going to make that illegal too? We’ll need a department of pricing to fix “fair” prices, and ban sales we deem too discounted. Don’t laugh, it’s already done this way in France.

    If we stop supermarkets from selling fuel, presumably we have to stop fuel retailers from selling food, drink, and pharmaceuticals. I dare you to put that proposal to any servo owner. You might want a helmet and ear-plugs first.

  47. Kingsley

    Thanks for thoughtful answer wreckage. On the overseas subsidy situation I’m afraid I still fear that whilst it may result in cheaper goods for Aussie consumers now what of the long term.? Absolutely agree best approach is for all sides to stop subsidies if that is the case. I guess to take your argument to the extreme should we wish overseas countries subsidise all goods and services so it is very cheap for us but we cease to have a private sector to pay for any of these wonderfully cheap goods? To my mind a subsidy is an abuse of free trade wherever it originates and should be opposed. Surely in the long run the consumer is best served if the genuine best producer in the world is allowed to produce against no head winds.

    In regards to Woolies and Coles I cannot prove they are engaged in predatory pricing but I have a problem with the viewpoint that says even if they were we should rejoice.
    They are engaging in this activity to either make more money now which would be hard to argue against or to make more money later when they have pushed the competitor out, that is a worry as if you care about the consumer then he is going to in the long run pay more.
    I don’t share your faith that Coles and Woolies couldn’t achieve some sort of cartel in either market but that is only opinion and nothing, I have no empirical evidence to support my unease.

    Thanks for response

  48. Oh come on

    They are engaging in this activity to either make more money now which would be hard to argue against or to make more money later when they have pushed the competitor out, that is a worry as if you care about the consumer then he is going to in the long run pay more.

    This is baseless speculation. If you have anything more than conspiracy theories, I’m all ears.

  49. wreckage

    Well under different circumstances they might have a chance at a cartel, but there’s nothing to suggest to me it’s likely. They’re small fish compared to the many, many multinationals they would have to lock out. I would say that they’re actually mostly competing for market share, with each other, rather than trying to muscle into a sector that is, as far as I know, no more profitable. I am also very, very wary of the ACCC, who seem to be required by their charter to prevent Australian companies competing with multinationals.

    Ultimately, given the blocking of merger, “enforced competition”, and then “enforced non competition” I doubt Australia will have many internationally competitive companies in the medium term, and eventually none. Doubtless people will blame capitalism rather than government micro management when we are all shopping at WalMart. What would you prefer? For Coles and Woollies to expand and grow, or to shop at, say, Walmart? Because eventually that is what the choice will be.

    It happened in grain handling, it’s playing out in the airlines, and now it’s started for the supermarkets.

    With subsidized imports, there is a specific problem: individual quality producers can get pushed out in the short term in favour of cheap product no-one buys twice. But generally there isn’t a problem. Cheap inputs make the economy work better, not worse. The challenge is to produce and market goods and services where people need or want quality, local knowledge, or personal service. In Australia, with high wages, high energy costs, high compliance costs, a small domestic market, and very restrictive laws at every level, manufacturing doesn’t stand much of a chance unless it is doing just that anyway.

  50. Michaelc58

    Thanks Wreckage.
    So you do recognise existence of predatory pricing, and acknowledge the need for a competition watchdog, since you have attempted to do the ACCC’s job by assessing the supermakets’ market power and concluded on behalf of the ACCC that they can’t dominate the petrol market.

    But Two problems:
    1. With respect, you saying it’s not predatory pricing doesn’t make it so.
    You can argue that, without proof, they are innocent, of course. But these things are extremely difficult to prove, and who investigates it and proves it – the corner petrol station? The consumer buying a tank of petrol? Even blatant price fixing is near impossible to prove. ACCC typically relies on accidental disclosure or whistle blowers like in the Visy case.

    We can argue (with justification) that the ACCC is bloated, should not micro-manage, has been making dumb decisions and should be reformed, but to argue for market anarchy, as some do here, is to deny that predatory pricing and monopolies can form and are harmful, and it make this blog seem extreme and cavalier, undermining its credibility in other areas.

    2. You say that ‘margins [in petrol retail] are garbage’ and supermarkets would not bother, but at the same time you seem certain that an 8c discount is not predatory. It seems somewhat contradictory.

    But I have to confess a deeper prejudice here. In regards to these petrol vouchers, and countless other cross-marketing and loyalty schemes, incl. frequent flier points, I can’t believe the population, including many executives, allows itself to be the toys of marketing games and trivialises their lives and work time with ‘clipping coupons’. Am I the only one here annoyed by them?

    There is a cost, personal and societal, to having the population waste time assessing not just the service or product, but the entire ecosystem of complex schemes that change daily. It seems to me, complexity can be used to obfuscate relative product quality and values and reduce informed consumer choice, on which I assume free efficient markets rely.

  51. Sinclair Davidson

    There is no such thing as predatory pricing.

  52. wreckage

    Monopolies are very hard to establish. If you don’t have a monopoly you can’t maintain it, which is the only workable definition of predatory pricing that doesn’t result in government run price fixing. In any case, lower prices never result from a monopoly. Monopolies result from a restricted market. Usually imposed deliberately or inadvertently by government.

    The Visy case was not of any significance, except to highlight the legalism of the ACCC.

    Sinc, who is an economist, says predatory pricing doesn’t exist. My question is, how would one ever prove ones innocence? You can’t prove you’re not a witch. Prosecuting people for crimes that cannot be disproven once the allegations are laid is dangerous and stupid, if not evil.

  53. The Fixer

    There is no such thing as predatory pricing.

    So, an organisation that both wholesales and retails, sells wholesale product to resellers, then retails direct into the same market as the resellers at a retail price point that is below what it charges the said resellers – what do you call that??

  54. mundi

    Which is the whole point of the ACCC. They know they can’t prove actual individual violations, they are just interested in social justice (which we all know isn’t justice at all).

  55. mundi

    So any factory outlet who also sells bulk to resellers is engaging in predatory pricing? Quick you better call the ACCC.

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