Watchdog nears the checkout on supermarket inquiry

RICHARD GLUYAS
September 06, 2013
The Australian

THE competition watchdog is “close to the end” of its investigation into the petrol discounting schemes of Coles and Woolworths, as the retail chains press their argument that petrol retailing is a competitive market.

Speaking after a business lunch in Melbourne, Australian Competition and Consumer Commission chairman Rod Sims said arguments about the impact of shopper dockets were “complex”.

The ACCC, he said, would of course examine the retailers’ position that recent foreign investment in petrol retailing showed the market was competitive.

“We’ll take that all into account, but there’s various arguments in relation to shopper dockets, including what’s happening to the base level of prices because of them,” Mr Sims told The Australian.

“The arguments are quite complex, and given we’re quite close to the end of the investigation, there’s not much more I can say.”

Coles and Woolworths this week insisted that petrol retailing was competitive, with low barriers to entry and growth opportunities, as shown by the emergence of new players. Netherlands-based commodities trader Trafigura Beheer’s global fuels business, Puma Energy, has spent up to $1 billion over the past six months on independent petrol retailers.

United Petroleum, which has an 8 per cent market share, is also considering strategic options, but last night ruled out a complete sale to Puma.
Late last month, Woolworths chief executive Grant O’Brien said the company had been offering a 4c-a-litre petrol discount to customers for “a period of time”.

“It’s a competitive market,” Mr O’Brien said.

“That’s great for consumers.”

The Woolworths chief said that, in 2010, Mobil’s volumes had been taken over by 7 Eleven, which was continuing to invest heavily in the fuel and convenience store market.

“I’m not sure they’d be doing that if they thought its future was as bleak as some would make out,” he said.

Mr Sims made it clear yesterday that he did not support the “national champions” argument — the proposition that companies had to develop huge scale in the domestic market so they could compete effectively offshore.

Companies, he said, had to get match-fit by competing at home, otherwise they would flounder offshore.

Mr Sims also said he was not in favour of a compulsory divestiture power, which other competition regulators have in their armoury.
“It’s too big a stick,” he said.

“Usually it’s hard to use and it’s more trouble than it’s worth.”

On its competition activities, Mr Sims said in his speech that the ACCC had instituted proceedings in five matters over the past year, including four cartel cases and a matter alleging misuse of market power.

He said the commission had increased its enforcement role and would be taking on more cases in the future.

With the Coalition in favour of structural separation, Mr Sims said regulatory arrangements for the telecommunications industry would not have to change much if the Coalition won the election.