11 February 2016
Earlier this week, the NT Chief Minister announced an intention to introduce new laws into the Parliament that will compel fuel retailers to regularly disclose their costs and profits. The announcement comes less than three months after the release of the findings of a comprehensive ACCC investigation of Darwin petrol prices that failed to detect any anti-competitive conduct amongst fuel retailers. Within this context, the value of the proposed legislation to NT motorists is highly questionable and the higher compliance cost burden placed on the many small fuel retailers that comprise the NT market risks upward pressure on retail fuel prices in the future.
The Northern Territory Chief Minister, Mr Adam Giles, announced this week that new laws would be introduced into parliament to compel NT fuel retailers to disclose their costs and profits on a regular basis.
“The legislation we will introduce sets out a framework for retailers in to disclose their fuel costs and profits to the Commissioner for Consumer Affairs each month, who can publish the information after checking the data and compiling it in a consumer-friendly format” said Mr Giles.
Mr Giles stated that the purpose of the new laws was to help drive petrol prices down in the face of Darwin fuel prices being consistently higher than that of other capital city markets.
The laws make provision for fines of up to $60,000 or two years imprisonment for fuel retailers that fail to disclose the required information.
A copy of the Chief Ministers press release can be viewed here.
While this draft legislation was discussed with the fuel industry almost 12 months ago, ACAPMA had understood that any decision to introduce these laws would only be taken after consideration of the findings of the ACCC’s detailed investigation into the Darwin retail market.
Released in November 2015, the ACCC investigation, which can be viewed here, concluded that while retail fuel prices in Darwin have been historically higher than in other Australian states – largely as a result of changes in the competitive fabric of the Darwin fuel market in recent years – the ACCC did not detect any anticompetitive behaviour amongst fuel retailers.
“The key findings of the ACCC report effectively amounted to the Darwin fuel industry being given a ‘clean bill of health’ with respect to market competition and therefore raises a central question about why these laws are now necessary”, said ACAPMA CEO Mark McKenzie.
The natural conclusion from any objective reading of the ACCC Report is that the fuel industry is operating in full accordance with the law and that the higher average fuel prices in Darwin are a consequence of a relatively small market (with higher costs of servicing) and a lower intensity of competition than the markets of larger capital cities.
“Given the ACCC findings, the NT Chief Minister’s motivations appear to be more about the upcoming general election and far less about actually reducing fuel prices in the Territory”, said Mark.
ACAPMA believes that the proposed legislation could work contrary to the Chief Minister’s stated goals of lowering fuel prices by increasing compliance costs for fuel retailers, which in turn, end up being passed on the NT motorists in the form of higher fuel prices.
The rhetoric surrounding the Chief Minister’s announcement suggests that the NT Chief Minister believes that fuel prices are being manipulated by large companies – an assertion that is wholly inconsistent with the findings of the recent ACCC investigation.
“The inconvenient truth is that, like other markets, the NT fuel retail industry comprises a large number of small Territorian businesses who will likely struggle to accommodate the higher compliance costs associated with the proposed legislation within current pricing practices”, said Mark.
While ACAPMA remains committed to working with the NT Government to promote fuel price transparency, the proposed legislation is simply not the answer.