Woolworths and BP say they are disappointed with the consumer watchdog’s decision to oppose BP’s $1.8 billion takeover of Woolworths service stations, and will now assess their options.
The Australian Competition and Consumer Commission says the deal would substantially lessen competition as fuel prices would probably increase at the Woolworths sites if BP were to buy them.
Woolworths currently operates 531 service stations and has 12 sites in development, while BP supplies fuel to approximately 1,400 BP-branded service stations throughout Australia, and owns about 350 of them.
Following a nine month review of the proposed acquisition, ACCC chairman Rod Sims said Woolworths was a “vigorous and effective” competitor that has an important influence on fuel prices and price cycles in many markets.
“Many consumers seeking out cheaper petrol will head to Woolworths petrol stations,” Mr Sims said.
“The bottom line is that we consider motorists will end up paying more, regardless of where they buy fuel, if this acquisition goes ahead.”
The acquisition would likely affect metropolitan price cycles by making price jumps quicker, larger and more co-ordinated, Mr Sims said.
“Reduced competition will also mean that prices will not fall as far, or as quickly, in the discounting phase of the cycle,” he said.
BP said it was disappointed with the decision, as it believes the takeover would deliver significant changes to convenience retailing.
“We remain confident that, with appropriate divestments as offered by BP, this transaction would not substantially lessen competition,” BP Australia President Andy Holmes said in a statement.
“In light of this, we are currently consulting with our lawyers to determine our next steps,” said.
Woolworths also expressed its disappointment, said it would assess its options.
Caltex Australia said it would continue to provide reliable and high quality fuel to Woolworths and its customers in line with its current supply agreement.
In a separate decision, the ACCC said it would conditionally approve Woolworths and BP’s shopper docket and rewards loyalty program proposal.
The ACCC had previously issued a draft decision allowing BP service stations to participate in Woolworths’ rewards program and accept shopper dockets, as that would likely result in “some public benefits”.
On Thursday, the watchdog said BP and Woolworths must limit shopper docket and loyalty scheme discounts to no more than four cents per litre, and Woolworths is not permitted to fund more than two cents of the discount.