Oilcode frequently asked questions

With the commencement of the Trade Practices (Industry Codes—Oilcode) Regulations 2006 (the Oilcode) on 1 March 2007, participants in the downstream retail petroleum industry will have certain rights and responsibilities, particularly in relation to terminal gate pricing arrangements, fuel re-selling agreements and dispute resolution. This question and answer (Q&A) page aims to clarify some of these rights and responsibilities and to provide some limited guidance on compliance with the Oilcode. The questions have been chosen based on common queries received by the Australian Competition and Consumer Commission (ACCC) in relation to the Oilcode.

Please note that the information in this Q&A is not legal advice. Industry participants are advised to seek legal advice in order to clarify their responsibilities under the Oilcode and ensure that they are in compliance with it.

Questions

This Q&A is structured to mirror the four parts of the Oilcode

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Answers

Part 1—Preliminary issues

1. How did the Oilcode come about?

The Oilcode came about as part of the Australian Government’s Downstream Petroleum Reform Package.

This package includes the:

• repeal of the Petroleum Retail Marketing Sites Act 1980
• repeal of the Petroleum Retail Marketing Franchise Act 1980
• prescription of the mandatory Oilcode under section 51AE of the Trade Practices Act 1974, known as the Competition and Consumer Act 2010 from 1 January 2011  (the Act).

For more information on the development of the Oilcode refer to the RET website.

2. What is the purpose of the Oilcode?

The purpose of the Oilcode in general terms is ‘to regulate the conduct of suppliers, distributors and retailers in the petroleum marketing industry’.

The Oilcode aims to improve transparency in wholesale pricing and provide better access to declared petroleum products, as defined in the Oilcode, at a published terminal gate price (TGP).

The Oilcode aims to assist industry participants to make more informed decisions when entering, renewing or transferring a fuel re-selling agreement by requiring the disclosure of specific information. For example, before a retailer enters a fuel re-selling agreement with a supplier, the supplier must provide a disclosure document.

The Oilcode also aims to improve the operating environment for all industry participants by providing access to a cost-effective and timely dispute resolution scheme as an alternative to litigation.

3. In a nutshell, what does the Oilcode do?

The Oilcode:

• establishes minimum standards for fuel re-selling agreements between retailers and their suppliers
• introduces a nationally consistent approach to terminal gate pricing arrangements
• establishes an independent downstream petroleum industry dispute resolution scheme, providing for the appointment of a Dispute Resolution Adviser (DRA).

The Oilcode has three key aspects:

• disclosure
• dispute resolution
• termination.

Disclosure

Disclosure obligations facilitate the flow of sufficient information to current and potential industry participants so that they may make informed business decisions.

Dispute resolution

As an alternative to potentially costly and time-consuming litigation, the DRA is appointed to facilitate and expedite the resolution of disputes arising in relation to commercial activities outlined within the Oilcode.

The primary role of the DRA is to provide a central point of contact for the industry to resolve disputes. The dispute resolution scheme applies to disputes arising:

• when a wholesale supplier fails to supply a declared petroleum product to a customer
• between the parties to a fuel-reselling agreement
• in relation to any of the provisions of the Oilcode about terminal gate price arrangements or a fuel re-selling business.

Termination

The termination processes described by the Oilcode aim to address many of the challenges encountered when parties attempt to terminate an agreement, such as acceptable reasons for termination, notice and how to deal with assets post-termination.

4. What are some of the important definitions in the Oilcode?

Commission agency

Includes a fuel re-selling agreement under which the retailer sells motor fuel at retail as an agent of the supplier.

Customer

A person engaged in the business of retailing or wholesaling declared petroleum products or an associate of that person.

Dealer council

An organisation made up of a supplier and a representative body of retailers with whom the supplier has fuel re-selling agreements.

Declared petroleum product

Any of the following temperature-corrected motor fuels:

• unleaded petrol
• a product consisting of a blend of unleaded petrol and ethanol
• a product consisting of a blend of unleaded petrol and one or more biofuels other than ethanol
• premium unleaded petrol (other than premium unleaded petrol proprietary product)
• diesel fuel other than a diesel proprietary product.

DRA

Dispute Resolution Adviser

Fuel re-selling agreement

A contractual arrangement between a supplier and a retailer that provides for a minimum duration and has the following characteristics:

• one party (the supplier) grants another party (the retailer) the right to conduct a fuel re-selling business and the supplier is able to exert substantial control over the operation of that business
• the fuel re-selling business will be associated with a trademark, commercial symbol or advertising owned, used, licensed or specified by the supplier
• the retailer is required to pay, or agree to pay, a fee before starting business.

Note: If a commission agency agreement meets the above criteria—except the requirement to pay, or agree to pay a fee—it is specifically identified as a ‘fuel re-selling agreement’ under the Oilcode.

The Oilcode does not apply to a fuel re-selling agreement for which the supplier reasonably believes that the amount of fuel that will be sold by a retailer will be less than an average of 30 000 litres for each month of the term of the agreement.

Fuel re-selling business

A business that is subject to, or intended to be subject to, a fuel re-selling agreement.

Retailer

Includes the following:

• a person who carries on a business of selling or supplying petroleum products to end-users
• a person who is a retailer under a fuel re-selling agreement
• a person who, otherwise than as a retailer, participates in a fuel re-selling agreement as a retailer.

Spot sale

A sale by wholesale of a declared petroleum product to an uncontracted customer by a wholesale supplier of the declared petroleum product.

Supplier

Includes the following:

• a person who is a supplier under a fuel re-selling agreement
• a person who, otherwise than as a supplier, participates in a fuel re-selling agreement as a supplier.

Temperature corrected

The assessment of the volume of a declared petroleum product by reference to the number of litres that the declared petroleum product occupies, or would occupy, at a temperature of 15°C.

Term contract

A contract between a customer and a wholesale supplier that sets out the price at which, and the conditions under which, the customer will buy a declared petroleum product for a fixed period.

Terminal gate price

The TGP is the price for a wholesale sale of a declared petroleum product that is worked out on a temperature-corrected basis and expressed in cents per litre.

Wholesale supplier

A person who sells declared petroleum products by wholesale from a wholesale facility.

Wholesale facility

Means any of the following:

• an oil refinery
• a shipping facility
• a facility connected by a product transfer pipeline to an oil refinery or shipping facility
• a facility connected by a product transfer pipeline to a facility mentioned in the dot point above.

5. Who does the Oilcode apply to?

A code of conduct prescribed under section 51AE of the Act has the force of law, which means that a breach of the Oilcode is a breach of the law. Section 51AD of the Act prohibits contraventions by corporations of an applicable industry code such as the Oilcode. This means that a breach of the Oilcode will constitute a breach of the Act.

Applicable industry participants and activities include:

• all wholesale suppliers
• sales of declared petroleum products by a wholesale supplier to a customer
• fuel re-selling agreements, including existing agreements, except those where:
• the wholesale supplier reasonably believes that the amount of motor fuel supplied will be less than an average of 30 000 litres for each month for the term of the agreement
• the wholesale supplier provides the prospective retailer with a written statement setting out the grounds for this belief
• any other retail activities included in the fuel re-selling agreement, or undertaken on the same site by the retailer for the wholesale supplier.

6. What is the role of the federal Department of Resources, Energy and Tourism (RET)?

RET is responsible for the development of the Oilcode.

For enquiries about government policy on the Oilcode, contact RET on (02) 6276 1000; alternatively, you can visit the RET website.

Part 2—Terminal gate price arrangements

7. How does the Oilcode aim to achieve a nationally consistent approach to terminal gate pricing (TGP)?

With respect to terminal gate pricing, the Oilcode aims to:

• improve transparency in wholesale pricing by requiring suppliers to post a TGP for declared petroleum products
• allow access for all customers, including small businesses, to declared petroleum products at TGP.

However, these provisions are not designed to:

• negate the ability of parties to negotiate individual supply agreements on commercial terms
• prevent the offering of discounts. 

Some of the specific TGP arrangements in the Oilcode include that:

• the TGP must be expressed in cents per temperature-corrected (at 15°C) litre for each declared petroleum product sold
• the TGP must either be posted on the wholesale supplier’s website or, if this is not possible, via a phone or facsimile service
• a wholesale supplier must set the TGP and post it each day—but may set more than one price per day as long as it is clear that the new price supersedes all previous prices
• a wholesale supplier must not include in posted TGP any amount imposed for, or in relation to, an additional service; however, they may subtract a discount or add a charge for an additional service
• customers must be given the option of buying declared petroleum products at the posted TGP (or a price derived from the TGP).

8. What sales documentation must be provided by the wholesale supplier?

The Oilcode requires two sets of sales documentation to be provided.

The first document, to be provided at delivery, must contain the following information:

• the declared petroleum product
• volume sold
• price per temperature-corrected litre (15°C)
• applicable posted TGP.

The second document, to be provided within 30 days of delivery, must include the following information:

• the supplier’s name
• the customer’s name
• transaction date
• the declared petroleum product supplied
• volume supplied
• the applicable posted TGP
• total price
• the details of any charges for additional services
• the details of any discounts.

In practical terms, if the information required within 30 days of delivery is included with the document to be provided at delivery, it would be taken to have been provided within 30 days of delivery.

9. When may a wholesale supplier refuse to supply?

The Oilcode states that a wholesale supplier of a declared petroleum product must not unreasonably refuse to supply the declared petroleum product by wholesale to a customer.

However, there are certain circumstances in which the wholesale supplier may refuse:

• when they do not have sufficient supplies
• when they reasonably believe that the customer is unable to pay
• when they reasonably believe that the customer is unable to receive or transport the product in compliance with the applicable occupational health and safety requirements
• when the wholesale supplier advertises a minimum quantity that they will sell wholesale and the customer requests less than this minimum.

Part 3—Fuel re-selling businesses

10. What are the disclosure requirements before entering a fuel re-selling agreement?

A supplier must give a proposed retailer a copy of the Oilcode and the relevant disclosure document at least 14 days before the retailer:

• enters into a fuel re-selling agreement or an agreement to do the same
• pays non-refundable money to the supplier or the supplier’s associate in connection with such agreements.

11. What are the disclosure requirements after entering into a fuel re-selling agreement?

Where a retailer proposes to renew or extend a fuel re-selling agreement, the supplier must give the retailer a copy of the Oilcode and the relevant disclosure document at least 14 days before the fuel re-selling agreement is renewed or extended.

The supplier must provide the retailer with a current disclosure document within 14 days of the retailer making a written request but the retailer can only request a disclosure document once in any 12-month period. However, a disclosure document provided in accordance with a request under a right of renewal does not prevent the retailer from exercising their right to request and receive a further disclosure document within the 12-month period since the last document was provided.

A retailer is also entitled to certain materially relevant facts as their supplier becomes aware of them. If they are not already mentioned in the disclosure document, a supplier must disclose issues listed in the Oilcode as materially relevant facts within 14 days of becoming aware of the facts. Materially relevant facts may include (but are not limited to):

• a change in the supplier’s majority ownership
• details of all criminal and civil legal proceedings related to the supplier
• an award in arbitration against the supplier
• court-enforceable undertakings given by the supplier to a public agency
• insolvency matters.

12. Does a disclosure document have to be provided in a prescribed form?

Fuel re-selling agreements that specify a duration of at least five years must be in accordance with the form set out in annexure 1 (long form disclosure).

When the duration is less than five years the agreements must be in accordance with the form set out in annexure 2 (short form disclosure). A director or executive officer of the supplier must sign the disclosure documents.

The Oilcode also requires that a person who proposes to transfer a fuel re-selling business must create and maintain a disclosure document to transfer the fuel re-selling business. Such a disclosure document must be in accordance with the form set out in annexure 3 (transferee disclosure).

Part 4—The dispute resolution scheme

13. What is the dispute resolution scheme under the Oilcode?

Where disputes cannot be resolved initially between the parties, the dispute resolution scheme in the Oilcode may be engaged. The key objective of this scheme is to provide the downstream petroleum retail industry with an effective and relatively inexpensive way of resolving disputes. This scheme includes the appointment of the DRA.

The Oilcode dispute resolution scheme covers disputes:

• where a wholesale supplier fails to supply a declared petroleum product to a customer
• arising between the parties to a fuel re-selling agreement
• arising in relation to any provisions covering terminal gate pricing and related arrangements, or fuel re-selling agreements.

The scheme includes the following features:

• The DRA is central to the dispute resolution scheme. The DRA’s role is to assist the parties to resolve a dispute. The DRA can make a non-binding determination on the disputes it hears.
• The Oilcode generally requires parties to attempt to resolve the dispute (this may mean agreeing on a resolution or agreeing to refer the matter to the DRA).
• If no resolution is reached, parties notify the DRA, who then appoints a person to provide mediation or other assistance.  Parties then must work with the appointed person to try to resolve the dispute.
• All mediation and assistance must be carried out in good faith.
• Statements made by parties while trying to resolve their dispute under the scheme are not admissible as evidence in a criminal proceeding or proceeding for the imposition of a penalty. (The only exception to this is for a proceeding in respect of the falsity of the statement.)
• The dispute resolution scheme does not prohibit anyone from coming directly to the ACCC or from taking private legal action for a breach of the Oilcode or the Act.

Note: The scheme does not apply to disputes relating to pricing issues such as allegations of predatory pricing activities and concerns about below cost selling of declared petroleum products. These are more serious allegations and are dealt with in other parts of the Act.

14. What is the procedure for a dispute concerning a failure to supply?

The Oilcode takes into consideration the potential for commercial damage that may flow as a consequence of a failure to supply declared petroleum products. Of course, the Act broadly covers refusal to deal; however, due to the potential upset to business upon a failure to supply, the Oilcode gives the DRA the power to get involved quickly in disputes about failure to supply.

Where the DRA is asked to attempt to resolve a dispute about a failure to supply, the DRA may ask the wholesale supplier to provide records regarding the failure to supply, to the DRA, as soon as practicable but within six hours. This requirement reflects the urgency of supply issues.

The following diagram illustrates the scheme for resolving refusal to supply disputes.

15. How are disputes in relation to other matters handled?

With respect to disputes that do not relate to a failure to supply declared petroleum products, the Oilcode requires that the parties must attempt to agree about how to resolve the dispute, unless the DRA is satisfied that there is no reason to attempt negotiation.

If the parties attempt to agree how to resolve the dispute, they may agree to appoint a person to mediate or provide assistance in resolving the dispute. The person appointed must in turn inform the DRA of arrangements they have put in place to assist the parties to resolve the dispute.

Alternatively, if the parties cannot agree to refer the matter, the parties must notify the DRA of this and the DRA must appoint a person to provide mediation or other assistance to resolve the dispute. If the DRA appoints a person to mediate the dispute or provide assistance, the parties must try to resolve the dispute with the help of the person appointed. Either party to the dispute may, with the agreement of the person appointed by the DRA, involve another party to assist or provide advice.

Only the original parties to the dispute may enter into an agreement to resolve the dispute. 

The following diagram illustrates the dispute resolution scheme for non-refusal to supply disputes.

16. How can the Dispute Resolution Adviser be contacted?

The DRA may be contacted by phone on (02) 9283 9208 and by fax on (02) 9264 8268.

View the Oilcode Dispute Resolution Adviser website.

The email address is info@oilcodedra.com.au.

17. What is the role of the ACCC in Oilcode dispute resolution?

The ACCC does not have a direct role in the dispute resolution scheme. The ACCC’s role is to monitor the effectiveness of the Oilcode and investigate breaches of the Act, including breaches of the Oilcode. In many instances, the engaging of the dispute resolution scheme will be the most appropriate starting point. Consequently, the ACCC will have a close relationship with the DRA and will refer matters to the DRA where it is appropriate. The DRA will also refer matters that undermine the strength of the Oilcode to the ACCC.

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