Do you ever wonder why all the petrol stations in your area seem to have nearly identical prices to each other? Australia’s competition watchdog is taking BP, Caltex, Coles Express, and other petrol station operators to the Federal Court over allegations of “price sharing” that were “likely to decrease competitive rivalry” amongst the group — collusion that saw prices rise for customers.
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At the centre of the potential collusion and information sharing taking place is a company called Informed Sources, which operated (and presumably still operates) a service in Melbourne, to which petrol retailers could sign up to communicate with their competitor outlets, allegedly proposing changes in petrol pricing and gauging competitors’ responses in real time.
Basically, it sounds it is being alleged that Informed Sources effectively had different petrol outlets signed up to an instant messaging service, letting them talk to each other privately and potentially agree in secret on informal petrol price rises — letting multiple outlets raise prices without letting the market decide and without exposing any one outlet to the risk of higher prices on its own.
If it has indeed been happening, this is very much not on:
Given the importance of price competition in petrol retailing and the reliance placed on the Informed Sources service by the major petrol retailers in setting prices, the ACCC alleges that the arrangements have had the effect or are likely to have had the effect of substantially lessening competition.
The competition provisions of the Act prohibit contracts, arrangements or understandings that have the purpose, effect or likely effect of substantially lessening competition.
Given the amount of money which we spend on petrol every week, and the role of the Competition and Consumer Act in promoting competition and preventing collusion, the cost of artificial price rises could mean millions of dollars per year — the ACCC suggests that a single cent’s difference in the price of petrol nationwide could mean $190 million in petrol company coffers.
The ACCC says that up to 12 per cent of the cost of petrol is made up of local costs, wholesale and retail margins, with the other components being fuel taxes (34 per cent) and the international price level (54 per cent). That 12 per cent is where petrol retailers make their money, and it is competition between brands that keeps prices low for the petrol-buying customer.
Petrol — as distinct from diesel, which is a whole different kettle of fish in Australia — makes up a large proportion of Australian household spending (especially if you’re poor), so it’s good to see the ACCC taking concrete steps to ensure that prices are not being artificially raised. [ACCC]