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Woolworths and Wesfarmers attract ACCC’s attention… again

The Australian Competition and Consumer Commission (ACCC) has today expressed its concerns and in the process singled out supermarket duopoly Woolworths (ASX: WOW) and Coles, owned by Wesfarmers (ASX: WES), over “the escalating shopper docket petrol discounts, now reaching 45 cents per litre.”

As the competition regulator, the ACCC’s concern is focussed on the potential advantage a subsidised fuel retailer may gain over an unsubsidised retailer. The Chairman of the ACCC, Mr Rod Sims, stated that “even at the level of eight cents, it would be difficult to see how an unsubsidised fuel retailer could compete on a sustainable basis. Now, the discounts are substantially higher.”

Mr Sims goes on to make a very valid point that “if Coles and Woolworths wish to offer their customers a discount, it should be off supermarket products, not petrol.”

Foolish takeaway

Investors in both Woolworths and Wesfarmers have for some time faced the issue of trying to determine whether these giants can continue to grow at reasonable rates into the future. Their large market size provides both supermarkets with significant market share and market power which continually attracts the attention of the ACCC. With the regulator determined to encourage competition and limit market power exactly how these two firms grow further is a difficult question to answer.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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