Discounting a hollow shopper-docket victory

The Australian Competition and Consumer Commission had a partial victory in the Federal Court today, but it was a Pyrrhic one.

The Federal Court ruled that Woolworths’ bundled supermarket and petrol ‘’shopper docket’’ discounts scheme breached the enforceable undertaking Woolworths entered with the ACCC late last year. That was the victory.

The significance of the court’s finding, however, was undermined by its decision that Coles, which had agreed the same undertaking, hadn’t breached it.

When the ACCC announced it was taking the supermarket chains to court in February the divergent response of the two retailers was instructive. Woolworths immediately withdrew its offer while Coles said it would vigorously defend its scheme. That suggested that there were important differences between the two and so it has transpired.

With the undertakings the chains had agreed not to offer discounts on petrol that were funded by businesses other than their petrol and convenience stores networks and to limit discounts to four cents a litre that were contingent on past or future purchases of goods from businesses other than those petrol and convenience store networks.

At the point where the ACCC initiated its action, Coles was offering discounts of up to 14 cents a litre on petrol, with 10 cents a litre relating to purchases of $20 or more on groceries bought from the petrol outlet and four cents a litre discount on the same purchase if they presented a Coles supermarket docket showing they had purchased at least $30 of groceries at a Coles supermarket.

In effect, there were two separate discounts that could be redeemed in one place at the same time -- but they didn’t have to be.

Woolworths’ scheme offered a four cents a litre discount for purchases of more than $5 in its convenience store network and another four cents a litre related to supermarket purchases -- but linked the discounts in such a way that the fuel discount was contingent on the supermarket purchase. After the ACCC launched its action, Woolworths altered its scheme to mirror the structure of Coles’ scheme.

The judgement means the two chains can continue to effectively bundle a supermarket fuel discount offer with discounts at their petrol and convenience store networks provided they structure the offer carefully, although the four cents a litre ceiling on the discount funded by their supermarket businesses remains. The ACCC won a battle but lost the campaign.

The Federal Court action was confined to the issue of whether or not the chains had breached the undertakings they agreed to in December; the court wasn’t asked to look at the more fundamental question of whether or not the shopper docket schemes were likely to lead to the substantial lessening of competition in a market.

The fact the ACCC has never sought to make that case -- indeed has looked at the schemes over a long period without challenging them -- probably signals it doubts that case could be made.