Coles and Woolies fuel schemes under scrutiny

Consumers love a discount but is it fair on small players?

Supermarket giants Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) – owner of Coles — have found themselves under fresh criticism, this time from a coalition of independent retailers calling themselves Independent Retailers of Australia, according to a report on Businessday.com.au.

The Independent Retailers of Australia are voicing their concerns surrounding fuel discounts being offered by the majors, arguing the fuel schemes are “detrimental to competition and would drive many independent retailers out of business because they were unable to compete.”

It’s not the first time Coles, which uses co-branded Shell outlets and Woolworths, co-branded with Caltex (ASX: CTX), has come under scrutiny. Previously the head of the Australian Competition and Consumer Commission, Mr Rod Sims, has voiced his concerns as well.

In response to the criticism, the majors have pointed out the savings Australian families have enjoyed thanks to fuel discount offers.

Foolish takeaway

The fuel scheme has allowed the supermarket giants to expand into fuel retailing and importantly the convenience store space, too. No matter what the end result of fuel schemes, Coles and Woolies are now major players in the fuel and convenience retailing industry.

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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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