Andrew Colley, 29 February 2016

Australian consumers will soon be able to use smartphone apps to get timely and officially credible information on where to buy lowest priced petrol. The move comes after the competition regulator and the country’s most established retail petrol price monitoring firm settled their decade-long differences.

Just before last Christmas the Australian Competition and Consumer Commission (ACCC) settled a Federal Court action it took in 2014 against online petrol price exchange Informed Sources and five leading petrol retailers, which used it to exchange site-by-site petrol price information every 15 to 30 minutes.

The key plank of the December settlement was an undertaking by Informed Sources to make the data, from retailers including BP Australia, Caltex Australia, Coles Express, Woolworths and 7-Eleven, available to motorists by May.

Informed Sources managing director Alan Cadd told The Australian Financial Review that the company had received a deluge of interest from various organisations keen to use the data. These ranged from software developers to major insurance, media and consumer price comparison brands.

“I expect around June the media will be doing ‘let’s rate the apps’ stories, because there will be around 20 to 30 apps that people will have put out,” Mr Cadd said.

SHARING DATA

Informed Sources wouldn’t be giving developers unfettered access to the same database it provides to its fuel retail clients, he added. Instead, the service was working on license conditions and programming interfaces that would give app developers ways of delivering data to motorists relevant mainly on their location or a particular region.

That, Mr Cadd said, would allow the database to hold its value but still allow the ACCC to meet its competition goals.

It would also let licensees find creative ways to use the information. For instance, fuel offers could be linked to other store sales promotions.

Mr Cadd estimated that the most diligent users of the apps could expect to save around $200 a year on fuel. That was compared to the average motorist, who can expect to save around $100 a year by observing weekly highs and lows in fuel pricing cycles.

However, he said, access to pricing data may not change anything for the third of all motorists whose current buying behaviours reflect that the convenience of using the nearest petrol station was their primary concern.

Nevertheless, he added, providing the apps remained important for competition overall.

TEACHING RETAILERS A LESSON

“If consumers get lazy then retailers will also get comfortable and they need to be taught a lesson – you need to shift your purchasing point.”

The competitive effect the apps generate was likely to be most dramatic once motorists in regional and remote areas started receiving site-specific information, Mr Cadd argued.

“It might be only one dealer that says ‘I’m going to try one cent lower’ and has great success. That’s when the competition effects will start to flow.”

The data’s journey from the Informed Sources’ data houses to consumers has been a long one.

Informed Sources has been collecting retail petrol pricing information in Australia and around the world since the late ’80s, when it used to send field staff to manually collect pricing data at the bowser. Over time it developed a subscriber-based method to collect petrol price data electronically and supplement its manual collection methods.

Major refiner-marketers and independent petrol retailers subscribed to the service under strict terms, and financed the data’s storage.

Mr Cadd estimated that Informed Sources’ current petrol price monitoring reach was around 85 per cent in metropolitan areas and 60 per cent in regional areas.

He said remote regional suppliers were often motivated to sell petrol as much out of community good will as they were by profit, and that their pricing didn’t reflect broader market trends.

COMPETITION WRANGLES

Informed Sources was largely untouched by competition debates until the ACCC’s six-month pricing inquiry led by then chairman Graeme Samuel was released in 2007.

The ACCC found that Informed Sources had the potential to distort the market by giving its subscribers fast access to pricing information ahead of both consumers and non-subscriber rivals.

“The depth of real-time information available to Informed Sources subscribers is not available to consumers. This raises particular concerns for the relative levels of price transparency between retailers and consumers in the retail petrol market in Australia,” the ACCC wrote.

Under Mr Samuel’s leadership, the ACCC supported the idea of reducing price sharing among retailers or making the pricing information available to consumers. However, given that the latter would be too costly for the regulator it referred the matter to parliament for consideration.

The Labor government under Prime Minister Kevin Rudd instead chose to adopt Western Australia’s then FuelWatch petrol price monitoring model nationally – another option that the ACCC explored in its report.

FuelWatch effectively required petrol retailers to report and commit to their pricing 24 hours in advance. The information was then published to motorists on the internet.

Informed Sources had already given evidence to the ACCC pricing inquiry that the legislation had effectively increased petrol prices in WA by an average 1 to 1.5 cent per litre as retailers increased prices to offset risks in their daily pricing decisions.

In its 2007 report, the ACCC wrote that views on the competitive effective of FuelWatch in WA were “divergent”.

The federal government scuttled the FuelWatch plan in 2008 when WA Senator Nick Xenophon sided against Labor and the Greens, and withdrew his support for its supporting legislation in the Senate.

That left the retail fuel pricing competition issue unresolved and, under its new chairman Rod Sims, the ACCC took the view that it needed to reduce price sharing information among retailers.

Rather than making fuel-pricing data available to motorists, it chose to take legal action against Informed Sources and its retail clients.

Senator Xenophon, who had persistently championed sharing the Informed Sources data with motorists, queried Mr Sims about the regulator’s stance at an estimates hearing in February 2015, and shortly after it launched its legal action.

In answer to the Senate economics committee taken on notice,– Mr Sims said the regulator was concerned that the development of an app could effectively give rise to price signalling.

“The real-time disclosure of petrol prices on apps can facilitate anti-competitive conduct by giving effect to price information sharing arrangements that could have the effect of substantially lessening competition.”

Mr Cadd said the process had come full circle.

“The whole thing has gone on longer than the Essendon drugs scandal.”

Extracted in full from the Australian Financial Review.

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