2 million small businesses join forces to call for the end of fuel discount dockets in new campaign

Four business and grocery groups – representing 2 million businesses and 5 million employees – have joined forces to call for the end of the anti-competitive behaviour by the ever-expanding grocery chains.

Not content with dominating numerous industries, the two national supermarket chains have tried to lock shoppers in with cross-subsidised fuel and grocery deals. This activity hurts other fuel operators and makes consumers captives to the chains’ supermarkets.  In order to get a fuel discount consumers have to buy groceries from them. Some recent offers have been more than 45 cents a litre, requiring consumers to buy $200 worth of groceries at their supermarket.

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Speaking on behalf of the group, Russel Zimmerman CEO of the Australian Retailers Association, said that consumers and retailers were sick of this abuse of power by the supermarket chains. The long term anti-competitive outcome is not camouflaged by the short term discount.

Says Zimmerman: “We support the ACCC chairman Rod Sims’ comments that if the chains want to give a discount, they should simply reduce the price of the product in the supermarket.

“In 2004, then ACCC chairman Graeme Samuel flagged fuel shopper dockets as being a potential issue, when he said: ‘There is, naturally some concern that shopper dockets will accelerate the decline in independent service stations and further entrench the major oil company sites which may, in the long term, lead to less competition and higher petrol prices.’

Says Zimmerman: “This concern was identified when the discount levels were around 4 cents per litre.  This year we have seen the supermarket chains offering 20 cents, 25 cents, 30 cents, 40 cents and upwards of 45 cents per litre discounts.

“Rod Sims, the chairman of the ACCC, has said he is looking at the schemes very carefully. The deeper levels of fuel discounts mean fuel being sold below cost, which of course is illegal.  He has urged the chains in the past to limit their discounts to food and groceries, expressing concern at the size of petrol subsidies from their grocery businesses. With fuel margins of around 5 cents a litre, it is impossible to give 45 cents a litre discounts and still be profitable.

“Our appeal today is to both the Government and the Opposition to stand up for the consumers in Australia; and pledge their support to assist the ACCC to take on these two behemoths once and for all. If something is not done now there will only be two major competitors in every industry in this country. You only have to look to Darwin to see what happens when the independent businesses are taken out of a market.

“The chains dominate the Darwin fuel market, the city suffers the highest retail price and highest margins in Australia.”

The group, calling itself the Independent Retailers of Australia, is made up of the Australian Retailers Association (ARA); Council of Small Business Organisations of Australia (COSBOA); the Australian Newsagents’ Federation Ltd (ANF); and the Master Grocers of Australia (MGA).

As well as appealing directly to both the major political parties to pledge their support for the ACCC to take on the chains, the group is running advertisements to take its message to the wider population.  The group hopes consumers around the country will join their fight and demand retailing return to some kind of normality with real competition for the benefit of all consumers by contacting their local member of Federal Parliament.

Peter Strong, CEO of COSBOA, said that nowhere else in the world had two companies managed to control so much market share across so many industries.

Says Strong: “It is bad enough that the chains control 80 per cent of the dry packaged grocery sector, as well as being in general merchandising, hotels, gaming machines, fresh food, liquor retailing and now petrol retailing. Someone has got to stand up for the independent retailers.  These cross-subsidised fuel dockets are the last straw.”

Says Jos De Bruin CEO at the Master Grocers Association: “Independent retailers were happy to compete on price and product when fuel dockets were introduced 17 years ago. They had been able to find ways to compete, but not at the levels they are now.

“At 4 cents a litre my members can put up a fair fight but they don’t have access to fuel. They can’t offer consumers what is effectively a $12.00 discount on a tank of petrol, paid for by the profit from their supermarket duopoly – so now they have to compete with one hand tied behind their backs.

“My members and I have written to the chairman of the ACCC, demonstrating the impact on independent retailers.”

Says Zimmerman: “Without tougher regulation and better scrutiny being imposed on the dominant chains, small business operators face a very bleak future, as do their staff and consumers.

“Overseas studies have shown that similar discounting schemes have hurt competition and led to the domination of grocery and fuel markets by major chains, eventually resulting in consumers paying higher prices at the supermarket and petrol bowser when competition has been shut down.

“The discounts represent a short term gain for some consumers. As competition is lost, workers will be out of jobs and businesses closed. Consumers ultimately will be stuck with higher prices and less choice.

“We urge the major parties to commit to showing leadership before it is too late for small business in Australia.”

The copy in the ad reads:

We appeal to both the major political parties to commit their support to ensure that competition in both the fuel and grocery markets is fair.

The fuel dockets offered this year by Woolworths and Coles amount to selling below cost. We believe this is a misuse of their ever increasing power in each of the fuel and grocery

markets. The supermarket chains already sell approximately 80 per cent of groceries and 50 per cent of fuel and liquor in Australia. If these fuel dockets continue at these levels,

it’s going to be very hard for other players to compete. As a consequence we may end up with just two players in the country selling fuel and groceries. This is not going to be

in the interest of consumers.

Australia has laws which stop companies abusing their market power and entering into arrangements that lessen competition. The major chains are offering big fuel discounts

which are being subsidised by grocery profits with the purpose of driving customers away from competitors. Recent discounts have been upwards of 45 cents per litre!

At any discount above 6 or 7 cents per litre, it is hard to see how unsubsidised fuel retailers could compete on a sustainable basis. And if forced to discount more, then

this would require sustained below cost selling.

If the chains truly want to give a discount, they should reduce their grocery prices.

We are hopeful the ACCC’s year long investigation into fuel dockets will reveal the damage the chains have caused to competitors in this market.

While the chains might argue these discounts represent a short-term gain for some consumers, they will deliver long-term pain to all consumers as competition will be

lost and workers will be out of jobs.

As four organisations representing two million Australian businesses and the five million staff they employ, we implore the major political parties to pledge their support to ensure that Woolworths’ and Coles’ fuel docket discounts are not misused.

Mr Rudd and Mr Abbott, will you support Australian small business and stop supermarket chains cross subsidising their fuel stations?