The Federal Court has drawn a clear line as to what fuel discounts major supermarkets are able to offer in excess of 4 cents per litre.
Those undertakings, given under section 87B of the Competition and Consumer Act 2010 (Cth), restrict the supermarket-come-petrol retailers from offering or allowing fuel discounts where those discounts are:
- not funded wholly by the fuel subsidiary or division; or
- greater in value than 4 cents per litre and, contingent on purchases of goods or services at a store or business separate from the retail fuel outlet.
Justice Robertson found that Woolworths’ first offer was in breach of its undertaking, while Coles’ offer and Woolworths’ revised offer were in the clear.
The relevant fuel offers
The ACCC alleged that the following offers breached the terms of the undertakings:
1. Coles had two fuel offers throughout the relevant period (together the Coles Offer):
- a discount of 4 cents per litre when spending $30 or more in a Coles Supermarket.
- a discount of 10 cents per litre when spending $20 or more on qualifying in-store items at Coles Express, at the same time as a purchase of fuel.
Each offer could be taken up alone, or together if the requirements of both offers were met. If used together, a total discount of 14 cents per litre would apply.
2. Woolworths fuel offers from 1 January 2014 to 9 March 2014 consisted of two offers (together the Woolworths First Offer):
- a discount of 4 cents per litre received when spending at least $30 at a participating Woolworths/Safeway Supermarket. This offer could be taken up alone.
- an extra discount of 4 cents per litre when spending $5 or more on in-store items at a Caltex Woolworths or Caltex Safeway co-branded outlet. This offer could only be taken up in conjunction with the first offer. If used together, a total discount of 8 cents per litre would apply.
3. Woolworths fuel offer from 10 March 2014 onwards also consisted of two offers (together the Woolworths Second Offer). It broadly consisted of the same two offers as the Woolworths First Offer, except that each offer could be taken up alone, or together if the requirements of both offers were met.
The ACCC’s allegations
The ACCC alleged that each of the Coles and Woolworths Offers consisted of an offer pursuant to which a customer could obtain a discount of 14 cents or 8 cents per litre, respectively, on fuel which was contingent on the previous acquisition of goods or services from a supermarket operated by that company (Supermarket Purchase), in breach of the undertaking.
The ACCC argued that:
- The Supermarket Purchase did not need to be the only circumstance or contingency to the offer being enlivened – it was enough if it was a circumstance or contingency;
- The discount was either contingent on the Supermarket Purchase or not, in the sense that such a purchase must occur in order for the discount to be allowed;
- One of the conditions which needed to be met in each case to obtain the full 14 cent or 8 cent per litre discount was the acquisition of a Supermarket Purchase of $30 or more; and
- The question to be asked was whether the discount, rather than subsets or elements of it, was contingent on the Supermarket Purchase having been made.
The arguments of Coles and Woolworths
Coles and Woolworths made broadly similar arguments that in relation to the Coles Offer and the Woolworths Second Offer, which included that:
- Neither of the offers offended the undertakings, because each discount was wholly funded by the fuel subsidiary or division, only the 4 cent per litre discount was contingent on a Supermarket Purchase, and the additional discount was contingent only on acquisition of goods or services from the fuel outlet (Fuel Retail Purchase);
- The offers were separate offers, with each capable of acceptance on its own terms and conditions independently of each other;
- Although the offers had been advertised together, this did not mean they should be treated as if they were merged into a single offer governed by a single melded contingency of a Fuel Retail Purchase and/or Supermarket Purchase;
- The full 14 or 8 cent per litre discount was not obtained only by having made a Supermarket Purchase, with part of the discount only obtainable by making a Fuel Retail Purchase; and
- The undertaking was seeking to remedy the mischief of cross-subsidisation by the supermarket businesses of fuel discount offers, which was not present in the fuel offers.
In relation to the Woolworths First Offer, Woolworths argued that although the two offers were linked, as a matter of substance the “extra 4 cents per litre” offer was not contingent upon a Supermarket Purchase, but upon the requirement that customers spend $5 or more in-store at the petrol station, and that the contingency concerning the Supermarket Purchase was relevantly exhausted.
The Court’s approach
Issuing separate judgments in respect of Coles and Woolworths, Justice Robertson found that the focus should be on the discount in fact allowed in the single transaction at retail of petrol, being 14 cents and 8 cents per litre in each case. It was not to the point that the total discount had its source in two offers.
The central question therefore became whether the discount was contingent on a Supermarket Purchase. The Court’s view was that “contingent on” meant “conditional on” or “dependent on”.
In relation to the Coles Offer and Woolworths Second Offer, the Court found that the discount was contingent only in part on a Supermarket Purchase, and that part was not greater than 4 cents per litre. Although the total discount would not be 14 cents or 8 cents per litre without the Supermarket Purchase, that does not make the entirety of the discount contingent on that Supermarket Purchase. Only 4 cents per litre of the offer was contingent on a Supermarket Purchase, and 10 cents per lire on a Fuel Retail Purchase.
On the other hand, in relation to the Woolworths First Offer, the Court found that the 8 cent discount was contingent on a Supermarket Purchase, as it was a prerequisite or essential condition that the customer “must spend” at least $30 at a participating supermarket, and they could not obtain the 8 cent discount otherwise.
The Court therefore found that Woolworths was in breach of its undertaking to the ACCC in relation to the Woolworths First Offer, and that the ACCC was entitled to declarations accordingly.
The power of the enforceable undertaking
This case is a reminder of the power the ACCC has by virtue of its power to accept an enforceable undertaking under section 87B of the Competition and Consumer Act. In this instance, because an undertaking was in force in respect of the conduct, the ACCC only needed to allege, and prove, that Coles or Woolworths had engaged in conduct which was contrary to the undertakings. It did not need to allege or prove any substantive breach of the CCA.
In addition to making declarations of breach, where a party is found to have breached a term of an undertaking the Court has wide powers under section 87B(4) to make orders:
- directing the party to comply with that term of the undertaking;
- directing the party to pay the amount of any financial benefit obtained as a result of the breach;
- directing the party to compensate anyone who has suffered loss or damage as a result of the breach; or
- any other order considered appropriate.
The ACCC’s application against Coles was dismissed, with the ACCC ordered to pay Coles’ costs.
Woolworths and the ACCC have been given 2 weeks to agree on the form of final offers to give effect to the Court’s findings, failing which the matter will return to Court on 12 May 2014 to allow the parties to make submissions. If you have any questions about the Court’s decision, or the implications of providing undertakings to the ACCC more generally, please contact us.