Rod Sims and ACCC have done it again over petrol discounts

TERRY MCCRANN
FEBRUARY 26, 2014
HERALD SUN

OH dear. Our competition tsar Rod Sims has made a complete ass of himself over the supermarket “shopper dockets” — and he’s now invited the Federal Court to make it official.
Back in December, Sims came out with his version of a “peace in our time” statement — figuratively waving a piece of paper above his head, he claimed that the supermarket duo Coles and Woolworths had promised never again to “go to war” with petrol discounts. That in future they would be capped at 4c — to the relief of competing supermarkets and canopies, if, not necessarily, drivers.
Well, that resounding “success” didn’t even last as long as the Neville Chamberlain original. Barely a month after the “last” 20c off docket, up popped Coles with a 14c one.
Hang on a minute, what happened to that 4c promise? Ah, you need to read the fine print. The 4c was the maximum agreed to any discount that was linked directly to supermarket purchases — the classic “shopper docket”.
As the ACCC statement back then said, the duo could offer as much as they liked actually at the pump, provided it was “funded from within their fuel retailing operations”.
Indeed, even the 4c is supposed to be funded from within their fuel retailing. Thus the Coles 14c is comprised of 4c if you spend more than $30 at a supermarket; and a further 10c if you spend $20 at the petrol station convenience store.
While Woolies has come back with a 4c plus 4c offer; and you only have to spend $5 at the convenience store to get the second 4c discount.
Where do you start with something that was so all-round misconceived and inept on the part of the ACCC? And that should end with the ACCC getting a thumping in court, as what Woolies and especially Coles have done is fully in accordance with the December deal?
And Sims should know it; especially again, so far as Coles is concerned
First, the very concept of what the ACCC set out to achieve — to stop drivers getting 20c, 30c and even 40c a litre of the price of their petrol, from time to time. That’s not exactly an obvious win-win for consumers.
Well, actually the issue IS a complex and vexed one — these ‘shopper dockets’ distort competition dynamics in both supermarkets and petrol; although Sims seems to think it only impacts in the petrol space.
They go beyond conventional cross-subsidisation — because they work to push consumers into both the supermarket, to get the docket; and then into the station to use it.
The core problem is that the (pre-Sims) ACCC long ago left the proverbial stable door open, by letting the duo get into petrol retailing; it’s so long since that horse bolted, it’s now got more grey hairs than this writer.
I can sympathise with the ACCC on two levels. There’s a mix of pluses and — mostly only potential — minuses for consumers in these shopper dockets.
And it is arguably “unfair competition” against petrol companies that don’t have supermarkets AND supermarkets that don’t have petrol stations.
Further, in trying to take action, the ACCC then and now does have to find a “head of power” for its move.
That said, the problem with the Sims deal back in December was that it was fundamentally incoherent. It also serves as a (another) salutary warning against ivory tower bureaucrats trying to mix it with shrewd business people.
The action was structured in the weird belief that each of Coles and Woolies has two separate pots of money — the money in the supermarkets and the money in their petrol stations.
That they shouldn’t be allowed to “take” money out of their “supermarket pot” and put it in the “station pot” to pay for the discounts.
Earth to ivory tower bureaucrat: in the real world, there is only one pot, the Woolies pot and the Coles pot.
The duo could happily run their petrol stations at a loss, or a lower profit, if it generated a (bigger) benefit for their supermarkets. Just as they cross-subsidise within supermarkets with specials and discounts.
The logical conclusion of the ACCC’s move on petrol is for it to move on to setting the prices of every item on every shelf in every supermarket; or perhaps, it could simply require that all, say, biscuit discounts have to be “funded” out of overall biscuit profits.
And so on — meat, dairy, etc. Can’t have that product cross-subsidy. Now the practical key to these new two-tier discounts is the link to the supermarket.
Sims said yesterday, that it was pleasing that Coles and Woolies advised that they were funding all fuel discounts from their fuel operations. But he then claimed that the bundled discount offerings were contrary to the undertaking.
It would have been wise for Sims to have read the undertakings before he made that claim. There is nothing in them which bans this bundling.
I think that it is crystal clear that what both Coles and Woolies are doing is fully in accord with their undertakings. As agreed, you only get 4c linked to your supermarket spend. The rest comes, again as agreed, directly at the station.
There is a major difference between the two offers, that would surely put the Coles one absolutely beyond doubt; and which Woolies could and indeed had moved to copy.
You could only get the second “station” 4c from Woolies if you also present the “shopper docket” to get the first 4c. So they are linked — but even so, I would argue that there’s nothing in the undertaking to prohibit it.
In the Coles case, you can get the “station” 10c whether or not you are using a “shopper docket” to get the first 4c. They are absolutely de-linked, except that you can use both to get 14c.
The ACCC was at best disingenuous in the way it presented its argument against Coles, using the “try-on” word “bundled” discount at one point in its statement, and not at another point.
It might be reasonable to “try on” a (desperate) case against Woolies. But at the same time, utterly pointlessly, as Woolies can simply switch to the Coles method.
But the ACCC is arguably and unacceptably mounting a frivolous case against Coles.
The embarrassing bottom line, is that the ACCC wants to fight tooth and nail to stop consumers getting more than 4c a litre discount.
It’s doing so, while failing to ever justify what the magic of 4c is. Why not 2c? Why not 6c?
While at the same time, saying the duo can do 10c or 20c.
But consumers should only get that, according to the ACCC, if they buy overpriced and mostly junk food at the convenience store rather than cheaper food and necessities at the supermarket. Gee, that really helps consumers.
It’s incoherent. It also fails the reality that Coles and Woolies can manipulate the AVERAGE price of petrol, through the cycle?
Or is that going to be the ACCC’s next “try-on”? Banning petrol discounts.