SUBJECTS: Petrol, independent retailers, oil code, predatory pricing, cartels, creeping acquisitions, Informed Sources, Fuelwatch, credit card surcharges
JOHN STANLEY:
The man at the centre of all this is the competition policy minister and the Assistant Treasurer. Indeed, some of these service stations are in his own electorate or just around the corner. Of course I refer to Chris Bowen who joins me now.
Mr Bowen, good afternoon to you.
CHRIS BOWEN:
Good afternoon John.
JOHN STANLEY:
You followed this debate today, do you think they've got a case for changing the Trade Practices Act?
CHRIS BOWEN:
Look, I had a good chat to one of the organisers today and look forward to having another chat to him in the not too distant future.
As I understand it they have a number of beefs, all of which I understand, some of which I agree with them on, others I may not agree on.
Look, I think at the hub of it is they have a few points that they want to make.
You raise the issue of whether they can buy petrol as cheaply as the major chains. I'll make some specific comments on that, but broadly, this is an issue that comes up from time to time, where big players can get things for cheaper than smaller players - whether its petrol stations or elsewhere, because they buy more of it.
Now I can understand that argument. You of course need to be careful when dealing with that, because bulk purchases is something we all understand. If we go into a shop and you say ‘I want to buy a lot more' then quite often the shopkeeper will say ‘well I'll give you a discount' - and that's how the system works. If you try to get rid of that across the board, then you've got to be very careful that you are not pushing prices up instead of pushing prices down.
In this particular case, this is governed by the oil code. That is something that arose out of the ACCC's petrol report, which you will remember. One of the recommendations of that report was that the Department of Resources, have a good look at the oil code, and that's happening. My colleague Martin Ferguson, the Minister for Resources, is ensuring that that follows through, and that will progress.
That review will look at all the issues arising out of, who can buy petrol for what price, and whether there is anything that can be done, whether it is in terms of the claims of these independents or more transparency etc. that's one of their issues.
I think they've also been talking about predatory pricing and that is of course were a big player comes in and undercuts the small player. Again, whether its petrol stations or anywhere else. Look, we have dealt with that and we continue to deal with it. One of the big problems with the law under the previous government was that it was very hard for the ACCC to enforce because the court had ruled, or the High Court had ruled, that the ACCC had to prove that the big player could make the money back into the future. A very hard thing to prove.
So, we have changed the law, to say that the ACCC, or anyone else - if a small business wants to bring a case themselves - should not have to prove that.
So look, as I say some things we can agree on and there are others things that might be more difficult to work through, but I am happy to talk to them about it.
JOHN STANLEY:
You said you agree with them on some and disagree on others…
CHRIS BOWEN:
Predatory pricing I agree with them that the law hasn't been tough enough, and we are dealing with that now. For example, as you say the NRMA has also been involved - that issue in the paper yesterday calling on the Federal Government to introduce a creeping acquisitions law, which is to give the ACCC the power, which they don't have at the moment, to come in and say ‘no, actually this would be bad for competition in this particular area, because you have bought up service stations in the past'. I agree with that and we have said we will do it.
I have put some options out there, and submissions on that have just closed.
JOHN STANLEY:
Just on practical terms, that would mean that where you have a couple of extra service stations come in at around the independents you could stop that happening?
CHRIS BOWEN:
Well, what it would mean is, let's take an example, whether its petrol or anything else, say you have a big company and you want to buy out a chain of small service stations, say they wanted to buy 30 service stations from one of their smaller independent chains. At the moment ACCC would be able to say no, because that would reduce competition.
But what they couldn't do is say no if they chose to buy one of those service stations a week for the next 30 weeks, because it is too small under the current law to get the ACCC's powers. So, that does need to be changed I think, the ACCC should be able to say ‘now hang on a second, that would be bad to competition in that area'. Now at the moment they do get involved in that but their legal basis for doing so is very thin. So we need to fix that. And we are fixing it.
Now, other examples may be independents have complained about shopper docket. Now you have to be very careful here, a lot of people like shopper dockets. They use them, they save money with them, and I don't think it's the role of the Federal Government to say well, hang on a second, we are going to ban shopper dockets.
But what I have read is that some of the independents are talking about getting together with other independent grocers and butchers and getting together their own scheme. I think that's great.
The more competition on these things the better, and if I can help in any way on that I will.
JOHN STANLEY:
On the shopper dockets issue I don't know, but do people complain about that?
CHRIS BOWEN:
Well, I think that some of the independents have raised it and said it is an unfair advantage for the big players that they can do shopper dockets and the smaller guys can't. I understand that point of view, but at the end of the day, we want vigorous competition between small, big, everybody.
That's how consumers win - and some people like shopper dockets other people say that I don't like them because they don't, at the end of the day in their view, saved any money. Well that's for the individual to choose. I don't tell people that they should or shouldn't use shopper dockets. That's up to them, but they should have the right to use them if they wish to.
And if independents can come up with their own scheme, I think that's great.
So look, these are some of the issues that these independent service stations operators are talking about, and in some cases they have a point and we are happy to help where we can, remembering we are not about giving protection or a special deal, what we are about is making sure that there is a level playing field.
JOHN STANLEY:
What about the idea that there is constant collusion in pricing, and every enquiry has been unable to nail it down?
CHRIS BOWEN:
Well John, what we have is ‘tacit collusion'. And of course collusion is illegal and I talked to you earlier in the week about making it criminal, so there's a jail term. But we have is tacit collusion, so people don't talk to each other, you have a service station that might say ‘well we might put up our prices by 5 cents a litre and through a secret website' where they share information – often independents don't have this website – where they share information and they can see what the price of petrol is at every service station around them is and if they haven't been matched then they might bring the price back down, but if the other petrol stations have put their prices up by 5 cents a litre then they leave it there.
So you get the price going up by the same amount, all the time, and we have the weekly price cycle. It's not that the oil companies or the retailer are colluding, but what we have is tacit collusion or what the ACCC has said is as being close to collusion as you can get with it being legal. Now that's why we think Fuelwatch is important because that would stop that. You would have one price locked in at the beginning of the day; services stations can say what it is, but you don't get this tacit collusion where they watch each other go up and follow each other up.
JOHN STANLEY:
You mentioned a secret website, well why haven't we seen that, that secret website…
CHRIS BOWEN:
Because service stations can pay a lot of money to get access to it; that you or I don't access to.
JOHN STANLEY:
But I don't understand, you would have thought someone would have actually revealed the details of it; someone…
CHRIS BOWEN:
It has been talked about in the ACCC's report at quite some length, and what it does is; you can pay a lot of money; the big service station chains pay a substantial amount of money, which means they get access to this website – it's called Informed Sources – and it means they have access to information that we as consumers don't have and what I wanted to do with Fuelwatch is give the information to the consumers. So that you and I and all of your listeners have access to the same information that the retailers have.
JOHN STANLEY:
And the Fuelwatch issue though and indeed the independents are saying with Fuelwatch that they would be stock with their price all day; they wouldn't be able to lower their price if they saw the station down the road declaring that they were going to be selling cheaper that day.
CHRIS BOWEN:
Everybody would be in the same boat and the experience in Western Australia is that while the number of independents has fallen, it has fallen around the world and in Australia for the same period, by the same amount. The result hasn't been any different…
JOHN STANLEY:
It's like a card game? You throw your prices down on the table all at the same time…
CHRIS BOWEN:
That's right. Everyone, at the same time, have to pun in their best price, up front. If they put in one too expensive, you'll be able to tell and I'll be able to tell by looking on the website, and we'll be able to go somewhere else.
JOHN STANLEY:
Okay, we had a caller earlier, Cameron, when we spoke to you earlier in the week, about the problem with the credit card surcharging at a Woolworths-Caltex service station at Belrose. He was saying, he was claiming it was about five per cent. Your office has spoken to him haven't they?
CHRIS BOWEN:
Yes, we have had a good talk to him and I think he has a good point. I understand it is advertised; I haven't been out there obviously, but he tells my office that it is on the bowser that there is a five per cent surcharge for credit card use, but that it's quite small.
Now what I'm quite concerned about, obviously, as you pointed out, if you pay, if you fill up your tank, and the first you know about a five per cent surcharge is when you get inside. You've only got a credit card on you, you don't have cash, and it's too late. So we've had a good talk to him, we've got the ACCC looking at it. I think it is frankly very rude; five per cent is much more than the credit card charge. I can understand petrol stations wanting to pass on credit card charges but no credit card, that I understand, charges five per cent; it's less then that and so that's a bit ruse, but I also think we need to do whatever we can to ensure motorists are told upfront and they can make a decision where to fill up there or not. So we are having a good look at that, we have had a good chat to Cameron and I think he's making very good points.
JOHN STANLEY:
Just finally you've been out there talking to those independents, some of them near your electorate. Do you think they are doing as much as they can in a tough market to differentiate themselves because as you know there are small businesses like butchers, delis and bakers who have thrived by value adding, by changing what they do so they don't compete on price but something else? So I guess with service stations you know, driveway service providing an extra service, maybe not get out of your car all filled up, and check the oil, that kind of thing. Should they do more of that?
CHRIS BOWEN:
That is a very good point. What we have of course is you often get the big players maybe it's the bulk purchasers that mean they can supply goods cheaper. Sometimes it's because the bigger you get the more efficient you are, you can make bigger savings, but when you get smaller players they can offer different types of services. That sort of friendly touch. You know you go to the local butcher and have a friendly chat to the butcher and you like going there rather than going to get your meat at the counter of the supermarket. Service stations are no different; prices are not the only thing they should compete on. I think that's a valid point.
JOHN STANLEY:
I have got a couple of people asking this question - in relation to FuelWatch, this secret pooling of information on this website, what would stop them from using that website to essentially collude, but in an informal way on what price they will all post on FuelWatch each day.
CHRIS BOWEN:
Well because that would be illegal. You would not be able to talk to anybody else about your price that you post on Fuelwatch. You have to put in your best price upfront.
JOHN STANLEY:
But you couldn't in advance say on this website say, well I am planning to post thus?
CHRIS BOWEN:
That would be collusion John. And we would deal with that under the sanctions that we have put in place this week.
JOHN STANLEY:
As opposed to right now, where they simply…
CHRIS BOWEN:
They don't collude as such, they put their price on the website, and say this is our price now and everyone else can see it.
And so you're running a service station and you say oh well John down the road has just put his price up by ten cents, now I can too. And that's what they do.
JOHN STANLEY:
Alright thank you that.
CHRIS BOWEN:
My pleasure.