The Australian Competition and Consumer Commission (ACCC) has begun proceedings in the Federal Court against Coles, Woolworths, BP, Caltex, 7-Eleven and fuel price information service 'Informed Sources'.
ACCC's initial investigations focus on the Melbourne fuel market, but could set a precedent across the country in the coming months. It is alleged the fuel price information (updated in 15 minute intervals) supplied to Informed Sources is being used by rival retailers to spike costs.
The Informed Sources program operates the same way around most other major Australian cities, including Sydney, so any ramifications are likely to send shock waves in all directions.
The practice is described as similar to 'price fixing' and the ACCC is concerned motorists are the victims of this at the pump.
"In particular, it is alleged that retailers can propose a price increase to their competitors and monitor the response to it," ACCC Chairman Rod Sims explained.
"If, for example, the response is not sufficient, they can quickly withdraw the proposal and may punish competitors that have not accepted the proposed increased price," he said.
In basic terms, retailers can respond and monitor each other's price changes and analyse both behaviours and strategies. The ACCC believe this is bumping up prices and decreasing competition - something that is important to consumers.
According to the ACCC, just 12 per cent of the petrol prices can be affected by local competition. The bulk (54 per cent) is make up of the international price of refined petrol, with 34 per cent from taxes and 12 per cent on local costs and wholesale and retail margins.
Caltex and Woolworths announced that they will both defend their actions, while it is unclear what the other retailers will do. The first hearing is set down for September 26 at the Federal Court in Melbourne.
To highlight the importance of low net fuel prices, the ACCC calculates that a 1 cent per litre increase over a year would cost Australian consumers around $190 million.
AAA backs ACCC court action
The Australian Automobile Association (AAA) has come out this week (August 20) strongly supporting the actions of the ACCC. The motoring body is concerned that motorists are paying too much and that the retailers could be to blame.
The AAA explained in a media statement that the allegations of coordinated price sharing are worrying and should be examined properly in court.
AAA Chief Executive Andrew McKellar said it is important motorists have access to current or real-time fuel price information. This way they can choose where and when they fill up without being dictated to by the giant national petrol retailers.
"Fuel costs are ranked by motorists as the top concern in terms of vehicle affordability and with increasing pressures on household budgets this will continue to grow," he stated.
"Motorists deserve to be able to pay a fair price for fuel and know the market is as competitive as it can be."