This week, the Royal Automobile Club of Queensland (RACQ) announced that its’ exclusive deal with PUMA (or at least exclusive until just recently) had delivered an estimated $5.19M in savings to around 440,000 Queensland Motorists in less than a year (see http://acapmag.com.au/2018/10/racq-fuel-discount-savings-tip-5-million/).
On the face of it, this is good news for motorists in Queensland.
But the scale and extent of these savings begs a real question about the independence of the RACQ’s extensive fuel price commentary.
By crossing the dividing line between being an authoritative advocate for motorists on fuel prices and being a market participant in the fuel retail industry (by reason of an alliance with an individual fuel retailer) the actions of the RACQ give rise to an apparent conflict of interest.
And the RACQ is not the only one who has engaged in alliance relationships with individual fuel retailers.
The Royal Automobile Club of Tasmania (RACT) entered into a marketing relationship with United Petroleum in that state some time ago and the NRMA recently entered into a promotional arrangement with Caltex in NSW for its member services products.
“Let me say at the outset that there is nothing fundamentally wrong with these relationships in a commercial sense, said ACAPMA CEO Mark McKenzie.
“But they do give rise to questions about the objectivity of continued, high-profile commentary on fuel prices by those Motoring Associations who have commercial relationships with individual fuel retailers”, continued Mark.
And these relationships potentially give rise to competition concerns, given that the recent nature of fuel industry criticism by some organisations – such as the RACQ – has included ‘calling out’ individual brands about their petrol prices.
“Blind Freddy can see that the unparalleled market power of these bodies and their significant potential to influence consumer purchase behaviours – coupled with the exclusive nature of these alliance agreements – gives rise to a question about the potential to distort market competition”, added Mark.
What is not clear is who pays for these arrangements?
Are they simply a case of the fuel retailer cutting their own margin to gain increased volumes?
Or are there subsidy arrangements operating between the motoring association and the fuel retailers?
If it is the latter, how is the Motoring Association funding these agreements? Is it being funded by increases in costs of other goods and services sold by the Organisation?
“In our view, and in the face of the scale of benefit announced by the RACQ this week, it is time for the Australian Competition and Consumer Commission to consider these questions and have a closer look at these arrangements to satisfy all of us that these arrangements are fair and reasonable”, said Mark.