Major Discounts a threat to smaller operators

Major Discounts a threat to smaller operators  

The Australian Competition and Consumer Commission has reviewed the recent three- day fuel discount promotions, instigated by Coles and then followed by Woolworths, last month.  

By Sacha Delfosse  

Under the promotions customers were offered discounts on fuel purchases of a maximum of 40 cents per litre if they spent up to $300 in a single transaction in Coles or Woolworths supermarkets from July 13 -15. The ACCC petrol commissioner, Joe Dimasi, said that after considering discount schemes, the ACCC did not view the one-off promotions as having breached the Trade Practices Act.

“A one-off promotion of this nature results in a short-term discount for consumers. For most consumers the discounts will only apply to one weekly or fortnightly shop and to one tank of fuel,” Dimasi said.

“Metcash, the major wholesale distributor to independent supermarkets, also offered equivalent discounts to consumers. This shows us that other players in the market have the ability to match the short-term competitive pressures of companies such as Coles and Woolworths. This is competition operating in the interests of Australian consumers.”

However Dimasi said the ACCC would continue to monitor fuel prices closely and would be assessing any future discount schemes.

Queensland senator Barnaby Joyce believes the promotions were a carefully designed gimmick targeting the independents, and was astounded that Dimasi could see anything wrong with the Coles and Woolworths promotions.

“I am also concerned that comments made by the ACCC petrol commissioner, that these are one-off promotions, is a simplistic view of what ultimately is a tactic by the major supermarket chains to increase their dominance of the petrol market in the same way they have come to dominate the grocery market,” Senator Joyce said.

“It is particularly disappointing that the ACCC petrol commissioner does not appear to appreciate the important role played by the independents to keep petrol and grocery prices down.”

Senator Joyce said that both Coles and Woolworths were deeply subsidising the petrol discount through grocery prices, and independents would not be able to compete with the promotions.

“These independents are critical to competition as once they are driven from the market petrol prices will go up in the same way as we are seeing grocery prices go up.”

Senator Joyce also called on Dimasi to ensure that independents get as many of the Mobil service stations earmarked for sale to Caltex as possible, and to investigate whether Coles and Woolworths where inflating grocery prices to cross-subsidize the discount programs.

According to South Australia senator Nick Xenophon, the large petrol discounts offered by Coles and Woolworths only proves that the major oil companies and the supermarket chains regularly overcharge for petrol.

“If they can offer discounts at this level, surely this is proof that the big oil companies and the supermarket chains are over-charging massively when they aren’t offering discounts,” Xenophon said. He argued that there was a strong need for independent scrutiny of retail and wholesale petrol prices, and if Coles and Woolworths did not lose money on the deal then their undiscounted petrol prices where not justifiable. “If the supermarket chains can offer discounts like this, surely they can afford for normal petrol prices to be lower year in, year out,” Senator Xenophon said.

The real target of the discounting were the independent fuel retailers, who cannot access petrol at the wholesale prices available to Coles and Woolworths, Xenophon said.

”This pricing stunt is further proof of the need for greater scrutiny of the wholesale fuel market. If we want real reform in the petrol market we need to know what prices are being charged at the wholesale level,” he said.

The ACCC missed the point in the recent petrol price war between Coles and Woolworths, according to the Victorian Automobile Chamber of Commerce, and it wants both supermarket chains made accountable for their actions.

VACC executive director, David Purchase, said that the casualties in the recent price war are independent service station owners, as well as consumers, and the fact that both supermarket chains offered the same discount at the same time could be regarded as collusive.

“While we believe the promotion between the two parties is genuine, VACC does question the motive, timing and consequences,” Mr Purchase said.

“While shoppers take advantage of the scheme, independent service station and convenience store operators are feeling the knock-on effects. They cannot match a Coles or Woolworths offer as they do not have the thousands of items on their shelves to absorb the cost. Independent retailers, who are already battling to exist, are losing customers in droves.”

Mr Purchase believes that if the promotion is repeated then independents will go out of business, and Coles and Woolworths would soon “control all checkouts and bowsers and then they could increase prices to another level.”

“This exercise has proved they can do what they want and when they want to. But at what cost to the consumer? It would be interesting to know if Coles’ and Woolworths’ grocery prices have increased, stayed the same or reduced during this promotion,” Purchase warned.

He said that comments made by ACCC chairman, Graeme Samuel on ABC News Radio, challenging competitors of Coles and Woolworths to match the 40 cents a litre discounting, where astonishing.

“It is small independent service station owners that are at risk from this manipulative 40 cents per litre docket discount,” Mr Purchase, said.

“Big supermarkets running big fuel outlets can discount heavily because they have the wherewithal to do so. But small independent service station and convenience Store owners simply cannot.”

“They do not stock the thousands of grocery items to subsidise a 40 cent per litre discount. Most small independent service station owners are only surviving by the skin of their teeth and this discount price war has the potential to tip many over the edge.

Purchase believes the ACCC should be considering the impact on the future of fuel retailing in Australia with two dominant supermarkets being prepared to sell fuel at below cost, and he questioned why Coles and Woolworths where prepared to lose money with the fuel discounting.

“Could it be because there will be a pay-off in the future once competitors and small independent service station owners have been eliminated?” Mr Purchase said.