Woolies feels crack of the fuel docket whip

RICHARD GLUYAS
APRIL 15, 2014
THE AUSTRALIAN
THE Federal Court yesterday helped to further shape the rules of engagement for fuel discount schemes, and there’s good news and bad news for both the big retail chains and Australian Competition & Consumer Commission chairman Rod Sims.
For Sims, the big competition issue surrounding fuel discounts by Woolworths and Coles had already been resolved, and that was the tendency for fuel prices to rise for 80 per cent of the population at the same time as the discounts were spiking for the other 20 per cent who had the good fortune to have shopper dockets.
The ACCC has successfully cracked the whip and it’s now confident that kind of behaviour has been nipped in the bud.
Compared to the big picture, the twin Federal Court rulings are incidental but still important.
While the watchdog is considering its legal options in relation to some aspects of the decisions where it went down, it’s now clear that bundled offers are OK and linked offers are banned.
Woolworths, for example, can continue to make the kind of bundled offer it unveiled on March 10 — a fuel discount of 4c a litre if customers spend more than $30 at a Woolies supermarket, topped up with a similar discount if they spend $5-plus at a convenience store attached to the petrol station.
What the retailer can’t do is make the convenience store discount conditional on customers first qualifying for the supermarket discount, as occurred between January and last month.
Woolies must have had an inkling that linked offers were on shaky legal ground.
It pre-empted yesterday’s decision by switching late last month to a bundled structure, mirroring the Coles approach.
This turned out to be an inspired move, because the ACCC failed in its challenge to Coles 14c-a-litre offer (10c at the bowser and 4c at the supermarket), made between February and March.
The court also backed the structure of the revised, bundled offer by Woolies.
In the Coles case, the ACCC argued that the full, 14c a litre discount was only available to customers who had made a “qualifying” supermarket purchase.
The watchdog unsuccessfully submitted this was in breach of last December’s undertakings — that discounts contingent on supermarket purchases would not exceed 4c a litre.
If for some reason you want your head to hurt, then a close reading of the two judgments — one for Woolies, the other for Coles — is strongly recommended.
The highlight is a hairsplitting deconstruction of key words in the undertakings.
For that, we can thank the various legal teams.
In the Coles case, the court backed the retailer, finding that only 4c of the 14c bundled discount was contingent on a qualifying supermarket purchase.
The ACCC, however, claimed victory on a number of fronts.
It noted linked fuel discount offers were comprehensively banned, and that a supermarket-generated fuel discount could not exceed 4c a litre in any single transaction at the bowser.
Also, Coles and Woolies can’t enlist their supermarkets to cross-subsidise fuel discounts.
The ACCC has no objection to fuel discounts in principle; it’s just that the petrol stations can’t be run as loss-leaders. To do so would be predatory pricing.