Fuel and the Federal Election

It’s federal election time again, and the choice is not clear-cut for fuel retailers and other small businesses.

The main differences between the parties are in the areas of trade practices reform and industrial relations which are of interest to all businesses. This is illustrated in the accompanying table prepared by the VACC and published in the August/September edition of Auto.

When it comes to petroleum industry regulation, the Liberal and Labor Parties are closer than you might expect.

It is not that the Government has forgotten about reform of the downstream petroleum industry, it is more likely that the industry has worn the ministry and the department out. The debate between the main protagonists continues along familiar lines.

In a recent letter to the editor of The Australian Financial Review, Gerry Hueston, Managing Director, BP Australia, restated his company’s call for the Franchise and Sites Acts to be replaced by Oilcode under the auspices of the Trade Practices Act (TPA). The following day, Michael Delaney, Executive Director, MTAA, responded asserting that removal of (the Acts) and their replacement with a mandatory Oilcode would only result in the loss of valuable property rights for some retailers.

Committed to reform

Despite these differences, a spokesperson for industry minister, Ian MacFarlane, advises that the minister is still “committed to introducing the reform package which will provide a uniform regulatory environment for all market participants.” The plan was to introduce a bill to repeal the Franchise and Sites Acts late last year and then have Oilcode in place by 1 July 2004.

The key features of the proposed Oilcode are national terminal gate pricing, minimum standards for petrol reselling agreements, and the establishment of a dispute resolution mechanism (including the appointment of a Petroleum Dispute Resolution Adviser).

Despite rejecting a bill to repeal the Acts in 1999, Joel Fitzgibbon, shadow minister for mining, energy and forestry, said in a recent speech: “Labor is not inherently opposed to the repeal of the two Acts.”

Both sides of politics regard the Acts as somewhat of an anachronism in the 21st Century. Nevertheless, they are still the law and are being enforced as such. In May this year, Mobil Oil Australia paid a penalty of $844,500 plus costs for breaches of the Sites Act in the late 1990s.

Labor’s plan is to change the order by introducing Oilcode first, and to align reform of the industry with changes to the Trade Practices Act (TPA).

Both sides of politics have also declared their acceptance of the supermarket alliances and shopper docket discount schemes. They are here to stay. So, the choice in part comes down to trade practices reform.

In the past couple of years there were major reviews of the TPA: firstly, the “Dawson” review instigated by the Federal Government and then the Senate inquiry instigated by opposition senators. In its report released in March 2004 the Senate Economics Reference Committee recommended tightening key provisions of the Trade Practices Act (TPA) including misuse of market power, in particular predatory pricing, and the introduction of ‘cease and desist’ orders.

These recommendations went much further than the earlier (2003) ‘Dawson’ report even though that review of the TPA was first proposed as part of an election promise to small business. The Federal Government is committed to implementing the majority of the recommendations of the Dawson report, but acknowledges that these are “largely directed at improving administrative processes”. It is less enthusiastic about the Senate Committee’s recommendations, adopting only those supported by Government senators.

The Labor Party has committed to implementing the Senate Committee’s key recommendations, including those related to misuse of market power and ‘cease and desist’ orders. These commitments were welcomed by groups such as the Australian Petroleum Agents and Distributors Association (APADA) and the Petroleum Marketers Association of Australia (PMAA) who have been asking the Government and the Australian Competition and Consumer Commission (ACCC) to take action on behalf of independent service station operators. Their letter was published in the last issue of Australian Convenience Store News.

The ACCC also welcomed the release of the Senate Committee’s report, noting that many of the recommendations were based on the ACCC’s own submission. However, changes to the TPA would not necessarily lead to the changes in the petrol market. Below-cost selling would not be illegal unless it was demonstrated to be ‘predatory’. The Senate Committee itself acknowledged this, stating in its report that “below cost prices may be evidence of predatory prices but they may also occur as a consequence of normal, competitive behaviour.”

Garth Symington, General Manager, APADA, speaks for many in the industry when he says, “This is a very difficult and frustrating issue. However, we will continue to seek the redress we believe is due to the non-aligned participants in the industry”.

By the time you read this, the election may have been called and campaigning underway. As voters, it’s now up to you.

The policy position of both major parties as at July 30 2004

(Reprinted courtesy VACC)