Rise in fuel discounting loyalty schemes questioned by Commerce Commission

The Commerce Commission is concerned Kiwis are focusing on discount fuel price scheme savings more than comparing fuel prices at different retail outlets.

Your playlist will load after this ad

It says discounts make it harder for people to compare actual prices between fuel retailers. Source: 1 NEWS

"We think that there might be less discounting if board price competition was stronger and delivered lower prices to consumers across the board," Commerce Commission chairwoman Anna Rawlings said.

Last year, more than 41 per cent of petrol and diesel was sold at a discount, compared to 21 per cent in 2011, the Commerce Commission’s draft fuel retail market study report states.

Major petrol companies including Z, Mobil and BP have told the Commission this shows strong retail competition and the body accepts that companies do actively compete on discount prices.

"But in our view the proliferation of discounts and loyalty offerings doesn’t provide a substitute for board price competition or competition over the ultimate price that consumers are paying," Ms Rawlings said.

The Commerce Commission said the widespread use of loyalty schemes means fuel companies’ sales are less affected when they increase fuel prices.

It also said the programmes are discriminatory for customers that don’t use them.

"It would be better for every consumer to be offered the same price, a fair price, rather than expect consumers to jump through hoops and for some consumers to access quite large discounts while there are consumers who aren’t accessing such large discounts who are effectively cross-subsidising them," Consumer NZ Head of Testing Paul Smith said.

Your playlist will load after this ad

The Commerce Commission recommends softening the rules so that petrol companies can switch between suppliers. Source: 1 NEWS

He called loyalty programmes for fuel a "means to divert our attention" from considering the original fuel price.

The Commerce Commission report stated on the evidence it had seen, the margin fuel companies earn on premium petrol doesn’t reflect the actual cost different with regular petrol, and the margins for premium fuel have grown faster than for regular petrol.

It also stated because the premium price is seldom displayed on petrol station signage, it’s difficult for consumers to shop around.

The New Zealand Automobile Association has renewed its call for businesses to display the premium price, and if they don’t comply, for the final Commerce Commission report to include a recommendation to make premium petrol signage mandatory.

"It costs more than their regular 91 octane and maybe they don’t want to put people off by showing just how much extra they are actually charging on that day," AA regulations principal advisor Mark Stockdale said.

Z Energy chief executive Mike Bennetts said in a statement loyalty schemes should "act in the best interest of consumers," while a spokesperson for Mobil said the creation of its discount programme was due to customer expectations and to increase competitiveness.

Waitomo Group chief operating officer Simon Parham said these schemes are "distorting customers understanding" of what they’re paying.

"It’s less transparent and actually comes with lots of strings attached. We don’t think that’s a fair deal for Kiwis," he stated.

Mr Parham said Waitomo’s price doesn’t change regardless of location, but said its low-cost fuel would be priced lower if it could access lower wholesale fuel prices as a result of increased competition initiatives.