ACCC concerned by supermarket promotion

Posted by Daniel Palmer on 16th October 2009

Coles has withdrawn a petrol price promotion at the request of the Australian Competition and Consumer Commission. The supermarket chain was to reward heavy spenders at their supermarkets with a substantial discount at the bowser in a move similar to a recent successful promotion, but cancelled the deal after the competition regulator raised concerns.

The two-week deal was set to provide discounts of up to 40c/litre but the ACCC said it could prove anti-competitive in the long-term.

Coles Express proposed to offer discounts of 40 cents per litre to customers who purchased more than $300 at a Coles supermarket between 16 and 29 October. Discounts of 25 cents per litre and 10 cents per litre were to apply to purchases of above $200 and $100 respectively.

The offer came after an earlier promotion in July 2009 in which Coles offered a similar scale of discounts over a period of three days. While there are some similarities in the promotions, there are also significant differences, the competition regulator contended.

“The ACCC has long acknowledged the consumer benefits arising from fuel shopper docket arrangements. As far back as 2004, the ACCC publicly noted their capacity to deliver cheaper petrol and encourage competition,” they advised in a statement. “However there is a balance to be found between providing consumers with discounts on the one hand, and on the other offering significant price cuts for sustained periods or repeated offers which might have deeper impact on competition in the long term.”

“The ACCC is not satisfied on information currently available that this promotion struck the right balance.”

Having received notice of the proposed promotion late yesterday afternoon, the ACCC communicated with senior Coles’ executives to air its concerns. This resulted in a decision by Coles to withdraw the promotion, the regulator said.

University of New South Wales consumer law expert Frank Zumbo welcomed the ACCC move as a win for competition.

“The promotion would have meant that Coles would have been selling petrol below cost for a sustained period,” he suggested. “Selling petrol below cost for sustained periods of time is a real and substantial threat to competition in the petrol industry. Such tactics are more commonly known as predatory pricing and are dangerous to competition as they are often thinly disguised tactics to drive the independent petrol retailers out of the market.”