ACCC approves Woolworths and Coles shifting discounts from petrol to groceries

Sue Mitchell
January 28, 2014
The Age
Australian Competition and Consumer Commission chairman Rod Sims has welcomed a decision by Woolworths and Coles to reallocate spending on deep petrol discounts to groceries.
”We always said that we welcome discounts,” Mr Sims told Fairfax Media. ”We also said that once the [petrol] shopper dockets don’t exist any more they’ll find other ways to give discounts and I’d welcome them. All that is good.”
Coles and Woolworths have started offering big discounts on spending in supermarkets after agreeing in December to cap petrol discounts at 4¢ a litre.
Commonwealth Bank analysts Andrew McLennan and Sam Teeger believe the new discounts, which allow customers to recoup up to 20 per cent of their grocery spending, are the equivalent of petrol discounts worth 20¢ and 40¢ a litre.
The chains are estimated to have spent $350 million to $509 million on petrol discounts in 2013 and are now reallocating this to the supermarkets, lowering the price of groceries.
The new discount offers are aimed at loyalty cardholders to encourage consumers to stretch their grocery spending.
Mr Sims said the new discounts were in line with the spirit of the ban on deep petrol discounts.
”I’m quite pleased with them giving discounts off groceries and discounts off petrol – it was the linkage we objected to,” he said.
”[They were] using their position and profits in one market to subsidise prices in another market – that was what was causing the problems.
”Our evidence was it appeared when shopper dockets went above 4¢ a litre that petrol prices went up. People who didn’t have shopper dockets were paying more for petrol when shopper dockets went above 4¢ a litre.”
Analysts say the retailers’ change in strategy will take some of the pressure off independent petrol retailers, but increase pressure on independent grocers, including those supplied by Metcash.
But Mr Sims welcomed the increase in competition. ”If you have supermarkets competing against other supermarkets, that’s what we’re here to foster,” he said.
”We’ll never complain about companies lowering their prices to compete against each other.”
Meanwhile, the ACCC is nearing the end of its long-running investigation into alleged misuse of market power by the major chains and unconscionable conduct in dealing with suppliers. The commission hopes to finalise the investigation towards the end of March.
The allegations include persistent demands for additional payments from suppliers.
The chains have also been accused by suppliers of threatening to remove products from shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid.
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