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Make predatory discounts a crime



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For more information contact Sharon Smith on 0433 620 850 or Nick Xenophon on 0411 626 677

23/10/13

Move to target ‘unfair and unsustainable’ shopper-dockets

MAKE PREDATORY DISCOUNTING A CRIME Independent Senator for South Australia, Nick Xenophon, wants to make it illegal for companies to use predatory discounting tactics to lure customers with “shopper dockets” offering massive discounts—that can have the effect of driving competitors to the wall. In particular Senator Xenophon has received complaints from independent retailers over Coles and Woolworths’ discounts of up to 40-45 cents a litre on fuel at their branded outlets. Senator Xenophon has launched a discussion paper which includes creating a new offence of “predatory discounting” under Part IV of the Competition and Consumer Act 2010 (attached). “The current system of supermarket shopper dockets is unsustainable and unfair, particularly on small businesses,” Nick said. “Consumers might think they’re getting a bargain but if smaller retailers go under, that reduces competition and we all lose in the end.” “These changes are aimed at addressing situations where retailers offer massive discounts and then cross-subsidise the cost of those discounts from other parts of their business, or other businesses within the same chain, affecting competition. “I am also proposing that Section 46 of the Act be amended so that predatory discounting is considered an abuse of market power.” The discussion paper sets out that a discount will be considered “predatory” if it meets all three specific conditions: common ownership between the business offering the discount and the business where it can be redeemed; a cross category subsidy occurs to finance the discount and; where the discount applied results in the discounted goods selling below cost. It will be circulated to all interested stakeholders, including independent supermarkets, consumer groups and Coles and Woolworths. Once he receives feedback by early next month, Senator Xenophon is planning to introduce the legislation to address the issue. “A company would have to meet all of these conditions to be considered predatory—I think that’s a pretty fair deal all round.”

PREDATORY DISCOUNTS

Discussion Paper - Senator Nick Xenophon

Outline: The aim of this amendment is to address situations where retailers can offer significant discounts and cross-subsidise the cost of those discounts from other categories, negatively affecting competition in a particular sector. A significant example of this type of discounting is the use of ‘shopper dockets’ by Coles and Woolworths. It will also allow the use of predatory discounting to be considered as a misuse of market power under Section 46 of the Act.

Proposal: It is proposed that a new section be inserted into Part IV of the Competition and Consumer Act 2010 to create an offence of ‘predatory discounting’. For a discount to be considered ‘predatory’, it must meet three conditions: there must be common ownership between the business offering the discount and the business where it can be redeemed; there must be cross-category subsidisation to support the discount; and the application of the discount must result in the discounted goods retailing for below cost.

It is also proposed that Section 46 of the Act be amended to provide that the use of predatory discounting is considered a misuse of market power.

Points for discussion: 1. Will these proposed amendments achieve the required result, ie limit the use of ‘shopper dockets’ and similar discounts and support competition? 2. What impact will the proposed amendments have on reasonable discounts offered by

retailers? 3. Are the amendments likely to receive Parliamentary support?

• Insert a new section into Part IV of the Competition and Consumer Act 2010 to address ‘predatory discounts’ • A discount will be considered ‘predatory’ when it meets all of the following conditions:

o There is common ownership between the business offering the discount and the externally located businesses where it can be redeemed; o Cross-category subsidisation occurs to finance the discount; and o The application of the discount will result in the discounted goods

retailing for below cost. • Amend Section 46 of the Competition and Consumer Act 2010 to state that the use of predatory discounting may be considered a misuse of market power

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