On 18 December 2007, the ACCC publicly reported on its inquiry into the cost of petrol in Australia.

After a comprehensive six month inquiry, 25 public hearings and 377 pages, the report finds “no magic bullets, no easy answers, no easy solutions”. Not that anybody thought it would, according to Assistant Treasurer Chris Bowen, who released the report at an official press conference at Parliament House.

Former Treasurer Peter Costello commissioned the inquiry in the lead up to the Federal Election last year after the ACCC’s monitoring of petrol prices revealed a substantial difference between the prices charged by local retailers and the international benchmark price.

The ACCC report (Report) delivers no conclusive positions on the petroleum industry. It concludes that the reasons for Australia’s petrol price cycles are unclear. It also reports no evidence of any systematic deviation between local prices and the international benchmark.

The Report does however provide a useful platform for the newly elected Labor Government’s policies and provides some indicators of what can be expected from the next inquiry into the Grocery Industry.

The Report also gives some guidance on how the new s.46 amendments targeting predatory pricing might be interpreted by the Courts and the ACCC going forward.

No evidence of collusion - price cycles an “enigma”

The ACCC concluded that the unleaded petrol market in Australia is fundamentally competitive. It found there was “no obvious evidence” of price fixing or collusion.

The ACCC also found there is little evidence to support media claims that petrol prices are higher during public holidays.

However, the ACCC concluded that it was not given a “satisfactory explanation” of divergences between prices charged by Australian petrol retailers and prices charged overseas.

The ACCC described the “well-defined price cycles in Australia’s retail unleaded petrol markets” as an “enigma”. Further, the Report found that petrol refiners have established “a comfortable oligopoly”, which poses a barrier to entry. Perhaps this is the most interesting issue in that the ACCC and Government may be moving towards “sectoral inquiries” as carried out by the UK Office of Fair Trading to review sectors where it is perceived competition could be more vigorous.

The ACCC has also used the Report as a basis to seek an amendment to the TPA dealing with s. 45 and in particular, the term “understanding”. This comes as a result of Gray J’s recent interpretation of the section in ACCC v Leahy Petroleum (2007),in particular the requirement and level of commitment, obligation or assurance to achieve an “understanding”.

Fuel to the flame - ACCC’s views on the Birdsville provision

The Report provides useful guidance on how the ACCC interprets the new predatory pricing provisions in the context of the petrol pricing sector. That said, the Report stresses that any meaning provided by the ACCC is “exploratory” and will require clarification by the courts.

Notably, the ACCC acknowledges that the operation of the new s.46(1AA) and in particular, the element of “substantial share of a market”, will significantly widen the potential operation of s.46.

With regards to the interpretation of the newly introduced concepts of “substantial share of a market”, “sustained period” and “relevant cost”, the Report notes that the exact meaning of each term will need to be considered on a case-by-case basis.

In the instance of “sustained period” for example, the ACCC concedes that a retailer offering an occasional weekend special price will be viewed differently to an established retailer who discounts its products for six months.

In many ways this is disappointing as it confirms the views of many commentators that the Birdsville Amendments were not sufficiently thought through and provide no certainty for businesses in an important area of the law.

Shopper docket arrangements receive a good behaviour report, but promise of closer scrutiny

The Report includes analysis on the impact of shopper docket arrangements on competition. A number of submissions made to the ACCC raised the concern that “shopper dockets” might give supermarkets the ability to leverage their strong position in the grocery sector into the petrol retailing sector, leading to anti-competitive effects.

There was a concern that discounts given under shopper docket arrangements might be funded by higher grocery prices.

The ACCC disagreed. It found that shopper dockets have benefited consumers, and promoted competition from other retailers.

However, the ACCC said that it will closely monitor any developments, including any changes to the impact of shopper docket schemes.

Recommended changes in relation to the petrol industry

The Report recommends a more detailed assessment of the agreements between oil companies to buy and sell petrol to and from each other, to ensure the arrangements do not reduce competition.

It also recommends an audit of terminals suitable for importing refined petrol in order to facilitate increased competition in the Australian petrol market.

The Report suggests that the government and the ACCC give further consideration to ways to correct the information imbalance between retailers and consumers. The ACCC believes petrol prices could be reduced by a few cents per litre if the issues identified in the inquiry are addressed.

The ACCC has promptly followed the Report’s release by writing to the chief executives of the oil companies and two major supermarket chains seeking an explanation for yet another, more recent, divergence between local and international petrol prices.

In addition, the ACCC is now demanding detailed information from the companies, including specific information on cost prices and profits at all levels of the supply chain.

Hot potato - ACCC Office of Petrol Commissioner

The ACCC has already taken immediate action as a result of the government’s recommendations. Mr Samuel is already seeking nominations for the new ACCC Petrol Commissioner’s position and is eager to establish the Office of Petrol Commissioner to enable the formal monitoring and reporting process of petrol prices to begin. The task for the Commissioner in monitoring fuel prices seems a very unattractive political hot potato and it will be interesting to see if Mr Samuel is bowled over in the rush for that position.