WA to ban discounted petrol price advertising?

Western Australia could follow New South Wales’ lead and ban service stations from displaying ‘discounted’ petrol prices.

According to ABC News, The Department of Consumer Protection in Western Australia is investigating a proposal to ban the display of discounted petrol signs across the state at service stations. NSW laws came into effect in early September, banning the advertisement of discounted fuel prices, while also forcing petrol stations selling LPG and diesel to display those prices.

Service stations that sell more than four fuel products are also being forced to advertise their top two selling fuels in addition to the LPG and diesel price, meaning a minimum of four prices in total.

The Australian Competition and Consumer Commission (ACCC) has also weighed in on the debate, although it is mostly concerned with supermarket retailers offering discounted petrol shopper dockets making it almost impossible for independent petrol retailers to compete, resulting in higher prices over time.

Both Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) owned Coles offer discounted petrol in return for spending a minimum amount on groceries. In some cases, the supermarket retailers have offered deep discounts of between 15 and 45 cents per litre of petrol. ACCC chairman Rod Sims has previously stated that, “If Coles and Woolworths wish to offer their customers a discount, it should be off supermarket products, not petrol.”

Currently Woolworths and Coles control around 50% of the petrol market, with Caltex Limited (ASX:CTX) holding 17%. BP, 7-Eleven and the independents share the remainder.

WA’s Consumer Protection says customers complain about the signs being misleading and confusing, with many not realising that they need a shopper docket to qualify for the cheaper petrol.

Foolish takeaway

One proposal being touted is for a national standard to ban discounted prices from being displayed. Given the lead taken by NSW and now WA, other states could soon follow in revising petrol advertising. The move is likely to anger Woolies and Coles, but consumers should be the winners, with lower prices and clearer advertised prices.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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