For the consumer, fuelling up and getting the groceries are the bare necessities and fuel shopper dockets have been softening the blow of fuel prices or “a huge help to families balancing household budgets” as Woolies CEO Grant O’Brien retorted to the ACCC's latest attack on ColeWorths.
What is all the fuss about? Well, its slightly confusing as the ACCC is canvassing a number of potential competition law breaches so that whichever way you look at it, the supermarket giants are ripping everyone off. On the one hand it’s alleged they are engaging in predatory pricing to drive out other petrol pump competitors by selling petrol below cost. On the other hand the ACCC is looking into whether the pair have been colluding over petrol prices. In tandem with this conduct is the jacking up of grocery prices to make up for the crosssubsidising losses on petrol. The formula is basically, the more I fill up my trolley, the more likely I will go fill up at the affiliated pump with my shopper discount. In other words, the more business I give ColeWorths in groceries the more business I'll give them in fuel. It's a no brainer for the mega grocers and its got the competition watch dog ready to pounce.
Going with predatory pricing, the ACCC will need to prove ColeWorths is in breach of section 46 of the Competition and Consumer Act. This means proving that they have substantial market power or market share; they’re selling products below cost for a sustained period; and they’re doing so for the purpose of driving competitors out of the market.
The ACCC has never won a predatory pricing case. The problem is that the High Court interprets s46 as meaning that if the alleged predator’s conduct has a business rationale, and it would have behaved the same way if it didn't have market power, then it hasn't done anything anti-competitive. The logic being, if I'm clever enough to compete in a way that gets me more business I shouldn't be punished if my competitors can't keep up.
Game on for Coles and Woolies?
Coles and Woolies have market power, and let’s assume they’re selling petrol below cost, but we don't think the ACCC can say with much confidence that the shopper docket schemes are devoid of any strategic merit. Even if they didn't have market power, its likely they would still offer the shopper dockets because let's face it, it works.
Shopper dockets are over a decade old, and the ACCC knows it won’t win a predatory pricing case over this, so it's kind of odd that the watchdog is making noise now about a prosecution. Or is it? With a federal election a month away it's a perfect opportunity to get up on the soap box and remind the politicians that it badly wants s46 amended to make it easier to get a win. Sore losers, we say.