With growing evidence that cosy clubs between large and powerful companies are bad for competition and consumers, the Federal Government needs to act quickly to deal with the ACCC’s concerns on the issue.

Service stations: a reflection

The latest push from the ACCC came last week when it decided to oppose the proposed Caltex acquisition of 302 Mobil service stations. As part of that decision the ACCC expressed grave concerns that the oil majors appeared to be engaging in “price coordination” activities.

In plain English that means that the ACCC is alleging that the oil majors are acting as a cosy club when it comes to petrol prices. In particular, the ACCC is pointing to the oil majors conveniently following each other on prices. According to the ACCC this is leading to sharp rises in prices at the beginning of the weekly price cycle and slow falls during the cycle.

Now the average motorist might say that sounds like collusion, but the competition lawyers would say that “collusion” has a technical legal meaning that requires that the oil majors actually come to some sort of agreement between themselves to act in unison on petrol prices.

Proving collusion is notoriously difficult as getting the proof of any agreement on prices has been next to impossible. That is, until recently, when the ACCC and the Australian Federal Police were given the ability to secretly tap phones and record meetings. The FBI has had those powers for years in the United States and has used them with considerable success, but our Federal Government has only recently given our enforcement agencies those powers.

Sadly, delay has been the hallmark of this Federal Government. We have seen a preference for endless Government Inquiries and “watching” exercises. The Federal Government and, Competition Minister Emerson in particular, like to watch.

We had the Fuelwatch farce which was about watching petrol prices. Thankfully, Fuelwatch was rightly killed off by Federal Parliament. In the meantime, Western Australia has continued with its state-based version of Fuelwatch with the inevitable result that motorists there are still getting ripped off in the same way as their Eastern cousins.

Fuelwatch remains just a gimmick and the fact that the oil majors have also been able to impose a weekly price cycle in Perth demonstrates that Fuelwatch is neither the answer to cosy clubs nor to the underlying competition concerns in the petrol industry.

Then came the GROCERYchoice debacle. Another gimmick, but this time it was much worse as millions of taxpayers’ dollars were wasted by the ACCC and the Federal Government. The Federal Government flicked it off to the Consumer group Choice only to have Minister Emerson kill it off before Choice could relaunch the new website. Woolworth and Coles didn’t want to provide the necessary information to Choice and the Federal Government took the duopolists’ side.

Clearly, watching prices is not the answer to breaking the stranglehold that large and powerful companies have over petrol, groceries and banking services.

What is needed is a multi-pronged approach.

First, we need to the ACCC and the Australian Federal Police to use their new powers to tap phones and record meetings between employees of rival companies. Let’s find out once and for all if competitors are agreeing on prices behind the scenes. Collusion is like theft and the corporate crooks need to be brought to account.

The ACCC is constantly hearing of allegations of cartel behaviour and now it has the additional powers and the back up of the Australian Federal Police to get the much needed evidence.

With serious jail terms of up to 10 years for cartel behaviour, the ACCC needs to send a strong signal and get some of crooks before the Courts as quickly as possible.

Enough of watching, let’s have some action from the ACCC. The ACCC made a great start in opposing the proposed Caltex acquisition of the Mobil service stations. However, it needs to do much more.

We need to protect competition and consumers from the various anti-competitive practices of large and powerful companies. The ACCC can actively enforce the Birdsville Amendment against predatory pricing. The Birdsville Amendment prevents a company with substantial market share from selling below its costs for a sustained period with the purpose of destroying competition.

Predatory pricing is bad for consumers because once the competition is destroyed prices go up and consumers get ripped off by the cosy club of large and powerful companies that remains.

Next, we need Minister Emerson to strengthen our competition laws. We don’t need the Minister to set up more Inquiries. We simply need the Minister to quickly deliver on the Federal Government’s promised strengthening of our anti-merger laws.

In June this year the Federal Government released a “discussion paper” with proposals to deal with creeping acquisitions. Creeping acquisitions are small scale acquisitions by large and powerful corporations that collectively destroy competition. Sadly, not only are the Federal Government’s proposals weak and ineffective, but Minister Emerson has been very slow to move on the issue.

Another issue on which the Federal Government continues to procrastinate relates to the “price coordination” activity that the ACCC is so concerned about. In January this year, the Federal Government issued another “discussion paper” with proposals to deal specifically with price coordination activities.

Again, while these proposals came a year after the ACCC first raised the issue with the Federal Government, a further year has gone by and the Federal Government and Minister Emerson have still not implemented the necessary changes.

So after two years, the best Minister Emerson can do is to have another Inquiry on “price coordination” behaviour.

Consumers urgently need world’s best competition laws to be implemented. They don’t need more inquiries, endless “discussion papers” and procrastination.

Most commented

8 comments

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    • paul says:

      07:34am | 09/12/09

      Thankyou for continuing to write and keeping us informed on this issue Frank. It’s interesting that the ETS creates so much hype about paying extra for goods and services, while punters unthinkingly hand over fistful of dollars to the duopolies.

    • Old Clive says:

      07:39am | 09/12/09

      The oil companie are experts in the field of collusion. The Americans found that out a long time ago when after investigation they split Exxon into Exxon and Caltex. The communication companies were also on the hit list. Maybe the ACCC should seek American advice to control these rogues.

    • Red says:

      08:06am | 09/12/09

      You don’t really understand Fuelwatch do you Frank? if you did you wouldn’t write such drivel about it
      Fuelwatch is about providing information for consumers to make intelligent choices
      If you use it and don’t just want sit on the couch and wait for the price of fuel to drop there is no weekly price cycle and you can get fuel at the lowest price in Perth any day of the week.
      Used with intelligent purchases of groceries from three different retailers it works even better.
      Today I will pay 98c a L for unleaded and $1.05 for diesel
      I am emailed the prices for tomorrow every afternoon and with a bit of research and planning there is no cycle just lowest prices

    • stephen says:

      03:13pm | 09/12/09

      You bozo climate-change skeptics can’t win can yer ?
      (Hope fuel goes to 10 bucks a litre by Christmas.)

    • Jack from Perth says:

      04:53pm | 09/12/09

      @Red, Fuelwatch does nothing but advise and, if anything hurt competition. Independent gas stations are forced to publish their price the day before and are given no chance to compete with the majors.

    • Iva Tarbell says:

      02:39pm | 10/12/09

      @Red - wonders will never cease. Just when we thought supporters of the farce of Fuelwatch were as rare as hen’s teeth and Yeti’s - one pops up out of the wood-work.

      Fuelwatch only chills competition, and furthers market concentration - in a market where competition is already on life support.

      The absurdity of Fuelwatch is that it makes it illegal for an independent retailer to lower his price - without giving 24 hours notice to some Government bureaucrat.

      Yes that’s right - only WA, can an independent retailer by fined for lowering this price without giving notice to the Government first.

      And as the “the cycle” - their is NO cycle under Fuelwatch - it’s a lucky dip as to what day of the week prices will be at their lowest in WA. Therefore many consumers get caught buying at the top of the cycle.

      In contrast, where Fuelwatch doesn’t exist in the Eastern states, families know that every Tuesday or Wednesday, prices will be at their lowest in the cycle and if they fill up on those days, they’ll get the lower price - much lower than they could under the discredited Fuelwatch scheme.  And if they want to find the cheapest outlet in their area, they can simply look up it up on motormouth.com.au.

      Supporters of the discredited Fuelwatch are simply diverting the debate on tackling the real problem -  breaking up the cosy clubs that have evolved in petrol, groceries and banking in Australia, due to an ineffective Trade Practices Act and its appalling administration by the keystone cops ACCC.

      Another “inquiry” is just more government by spin & stunts - the hallmark of the Rudd Labor Government. - and an excuse for inaction.
      Until real action is taken to repair Australia’s broken Trade Practice Act - these cosy clubs in petrol, groceries and banking will continue to rip off Australian families and undermine economic prosperity.

    • Someone says:

      04:57pm | 12/04/10

      Cheapest petrol in Perth:
      Average price = Wednesday
      Lowest price = Thursday
      Has been for the past two months, and was like that for most of 2009. If you fill up in the early half of the week, then you can pretty much guarantee a good deal. And if the cycle goes crazy (which does happen anywhere, regardless of FuelWatch), just hit the internet for any price rises. It happened in December/January in Perth, February in eastern states.

      And under FuelWatch, big companies also have to phone through 24 hours in advance to decrease prices. Or to increase them - if you mis-time the petrol purchase, you can still get low prices for the couple of days after the price hike because it takes a day for other companies to be able to hike. No one hikes on Wednesday apart from BP. And the fact that WA has Gull, Peak and Liberty as well as a lot of other smaller places says something - in Adelaide, I only ever saw Caltex (Oilco), BP (oilco), Caltex/Woolworths (Supermarket), Coles (Supermarket), Mobil (oilco) and a relatively small number of Liberties (Independant).

      FuelWatch also works for a number of regional cities where the price cycle doesn’t happen and probably never did.

    • Someone says:

      02:50pm | 14/04/10

      When I say average, that doesn’t include BP stations. Never ever buy petrol from BP on a Wednesday in Perth!

 

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