ACCC gives all clear to discounts from supermarket giants

Posted by Daniel Palmer on 23rd July 2009

The heavy discounting on petrol instigated last week by Coles has been cleared by the competition watchdog.

In a move that was criticised by consumer group choice and Independent Senator Nick Xenophon, Coles offered 40 cents/litre off for people who spent $300 or more at the supermarkets, with the discounts scaled back below this outlay. Woolworths and Metcash soon followed with a replication of the Coles offer.

Mr Xenophon called for an ACCC enquiry, believing such a move would destroy independent retailers and potentially push up the price of groceries.

“There are rules against predatory pricing, where the effect of a very deep discount is to actually push independent operators out of the market, and if that happens consumers are worse off,” he said, according to the ABC. “It also begs the question, if Coles and Woolies can offer these sorts of discounts, does that mean that we’ve been overcharged for petrol all along and overcharged for groceries?”

The ACCC has now completed their analysis of the competitive implications of the offer, concluding that it was a good deal for customers.

“After considering the Coles and Woolworths discount schemes we have formed the view that these one-off promotions do not breach the Trade Practices Act,” Joe Dimasi, ACCC Petrol Commissioner, advised. “A one-off promotion of this nature results in a short term discount for consumers. For most consumers the discounts will only apply to one weekly or fortnightly shop and to one tank of fuel.”

“Metcash, the major wholesale distributor to independent supermarkets, also offered equivalent discounts to consumers. This shows us that other players in the market have the ability to match the short term competitive pressures of companies such as Coles and Woolworths. This is competition operating in the interests of Australian consumers.”

Mr Dimasi added that the competition regulator would monitor any further offers in the sector closely, and they may be doing so sooner rather than later if the reactions of Coles and Woolworths are any guide.

“Watch this space,” Coles spokesman Jim Cooper told AAP yesterday. “We are always looking at these things.”

Both companies saw a rise in sales, although Woolworths indicated it may not have been substantial.

Coles, on the other hand, hinted that the promotion may have outperformed expectations.

“The offer has finished and while we’re not giving out sales figures or other estimates, we were very happy with the customer response,” Mr Cooper said.

They have since followed up with a special discount for seniors at their grocery outlets this week; a promotion that was not matched by their competition.