Late yesterday the Australian Competition and Consumer Commission was advised of a new fuel discount promotion Coles intended to commence today. Coles is now in the process of withdrawing the offer following issues raised by the ACCC.

Coles Express proposed to offer discounts of 40 cents per litre to customers who purchased more than $300 at a Coles supermarket between 16 and 29 October. Discounts of 25 cents per litre and 10 cents per litre were to apply to purchases of above $200 and $100 respectively.

This offer comes after an earlier promotion in July 2009 in which Coles offered a similar scale of discounts over a period of three days. While there are some similarities in the promotions, there are also significant differences.

The ACCC has long acknowledged the consumer benefits arising from fuel shopper docket arrangments. As far back as 2004, the ACCC publicly noted their capacity to deliver cheaper petrol and encourage competition.

However there is a balance to be found between providing consumers with discounts on the one hand, and on the other offering significant price cuts for sustained periods or repeated offers which might have deeper impact on competition in the long term.

The ACCC is not satisfied on information currently available that this promotion struck the right balance.

Having received notice of the proposed promotion late yesterday afternoon, the ACCC communicated with senior Coles' executives raising its concerns. This resulted in a decision by Coles to withdraw the promotion.

Coles is now dealing with the logistics of withdrawing the promotion completely and informing its customers.