Intuitive reactions from independent supermarkets and independent fuel retailers have been that the practice increases the market power of the large chains. The intuitive defence is that the practice is simply a competitive practice which the independents can match by setting up their own similar arrangements. However, the law and economics literature on the subject in the United States is undecided whether the practice involves competitive harm, suggesting that the practice does not involve abuse of market power but may be analysed more appropriately as a form of tying, or exclusive dealing, like customer loyalty programs. Limited econometric studies in Australia have found no abuse of market power, but lack of access to data makes analysis difficult and doubts remain.

The ACCC has announced a resolution of its recent investigation of shopper docket programs by Coles and Woolworths. The ACCC has accepted undertakings that fuel discounts will be funded by the fuel operations and that shopper docket discounts will not exceed 4 cents per litre. Where does this leave independent grocery and petrol retailers who believe they have been the victim of anti- competitive conduct and have suffered losses in the past? The time period to bring actions for compensation under the CCA is 6 years, subject to any applicable statutory protections for notification of exclusive dealing. How does the ACCC undertaking affect the independents’ right to meet competition by offering shopper dockets in the future?

It is suggested that independent grocery and petrol retailers who may have suffered loss should examine data available to them with a view to protecting their position given that the ACCC has implicitly found against cross-subsidised shopper docket schemes. All market participants using shopper docket schemes need to consider how they might modify current schemes in that event to avoid any perceived anti-competitive effect. This article sets out some of the relevant principles and areas of vulnerability.

The analytical framework of the CCA is not suited to deal with bundled discounts. Many suppliers utilising shopper docket schemes approach it as exclusive dealing, in that either or both retailers offer discounts on condition the customer acquires other goods from another supplier, i.e. mutual third-line forcing. Parties can gain protection under the CCA by ‘notifying’ the ACCC of the practice, which the ACCC can then accept or oppose if it consider the practice harmful. Successive enquiries have recommended repeal of the prohibition of third line forcing, and it appears that the ACCC has routinely responded to such notifications with a statement of ‘no action’. However, shopper dockets are not a purely ‘vertical’ arrangement, and exclusive dealing is not a wholly appropriate means of determining competition effects. The ACCC will in future presumably respond to such notifications consistent with the undertakings accepted from Coles and Woolworths.

The ‘anti-overlap’ provision that protects exclusive dealing from ‘double jeopardy’ as ‘any other anti-competitive agreement’ is limited and does not apply to features of the agreement or understanding that may take it outside the kind of vertical arrangement contemplated by exclusive dealing. Arguably, therefore, notification of exclusive dealing does not wholly protect shopper docket schemes from the prohibition of anti-competitive agreements generally. Parties to such agreements may additionally be vulnerable to per se contravention if they are, or would be but for the agreement, competitive with each other, which may be the case where supermarkets have arrangements with petrol outlets to sell groceries and fuel. The remaining category of conduct prohibited by the CCA is misuse of market power to harm competition. This can apply if the large supermarkets could not have entered into shopper docket schemes but for their market power. Some studies argue that this is not the case, and any advantage is mere ‘first mover’ advantage which can be countered by retaliatory conduct.

However, it may be that the greatest benefits of the schemes are enjoyed where the collaboration goes beyond the simple reimbursement model that independents are able to negotiate, i.e. the participants’ activities are ‘integrated’ so that joint profits are maximised. Econometric models which assume that ‘non-integrated’ participants are able to gain corresponding benefits may over-estimate the ability of independents to retaliate effectively by setting up their own schemes and so eliminate ‘first mover’ advantage.

The paradoxical effect of the ACCC undertakings is that independent supermarkets would appear to be prohibited from offering shopper dockets unless they can convince the petrol retailer to wholly ‘fund’ the discount. It may be expected that internal accounting of ‘integrated’ participants can easily show that the petrol operation ‘funds’ the discounts. However, it is arguable that this concept is not meaningful in an integrated business operation.

The question remains as to the competition effects of shopper docket schemes. We can conclude that a rational retailer will not unilaterally and voluntarily discount prices if the result would be to decrease revenue and profit. It can be argued that bundled discounts alter consumers’ response to price changes, i.e. by accessing customer loyalty of the shopper docket partner, each participant increases revenue such that the bundled discount actually leads to increased revenue and profit. By altering the response of consumers, it can be argued that bundled discounts increase market power. Whether the schemes rely on market power in the first place, or simply increase it, will determine whether the cause of action is based on ‘misuse of market power’ or ‘anti- competitive agreements’ generally. In either case, prior ‘notification’ of exclusive dealing should not be a defence.

Clearly supermarkets have access to data that will demonstrate whether shopper dockets are anti-competitive or not, i.e. they know what they are doing. Given that knowledge, the debate about the adequacy of the current ‘purpose’ test for misuse of market power may be irrelevant. The ACCC clearly has power to gain access to the data in exercise of its investigatory powers, though it is not clear whether the ACCC has gained such access in ‘resolving’ the issue with major supermarkets. Absent that data, could an independent retailer prove the necessary anti-competitive effect? Arguably it can use its own data to demonstrate the effects on it of the shopper dockets schemes. Further, in litigation, access will generally be available to data indicating the market effects and benefits enjoyed by the large chains and the interaction between shopper docket partners.

The final question of interest is, ‘how might shopper docket schemes be modified consistent with the ACCC undertakings, and where does this leave independent grocery and fuel retailers?’ Econometric studies modelling the effect of ‘integrated’ compared to ‘non-integrated’ partner schemes suggest that a level playing field may require access by non-integrated independents to shopper docket schemes on a corresponding basis to ‘integrated’ grocery and petrol retailers if anti- competitive effects are to be avoided. The principal element of the ACCC’s solution, however, is to require discounts to be wholly funded by the fuel operation. This may be effectively meaningless and impossible to enforce in the case of ‘integrated’ businesses and may well disadvantage  independent  supermarkets and fuel retailers.