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Dear Ms Martin

I am writing as secretary of the Wagga Watchdog Committee which has been invited to appear before the ACCC next Monday.

I understand our Chairman, Erwin Richter, has been in touch with you on several occasions and he's phoning you this morning to bring you up-to-date. He'll also post some press cuttings to show you what we've been up to recently.

Meanwhile I enclose a copy of an article (plus disk) I wrote last weekend for the local media. It was quoted in yesterday's Wagga Leader and I was glad the paper identified the two main issues. These are the urgent need for:

(a) comprehensive and continuous monitoring of petrol prices

(b) the ACCC exercising additional powers such as phone tapping to avoid a repeat of the Geelong debacle.

was also an editorial in Tuesday's Daily Advertiser making the same points.

Erwin, with his long experience within the fuel industry over the years, will on:

(a) competition in rural areas, including the potential role of local councils in making sites available for independents

(b) bullying behaviour by big oil companies, exemplified in a recent incident involving Shell;

(c) the need for the ACCC to take into account the diesel in country areas in particular.

wishes

role of

On 10 September the Australian Competition and Consumer Commission is to conduct a public hearing in Wagga as part of its inquiry into the price of unleaded petrol. Its final report is due with the Treasurer not later than 15 October.

The public was invited to make submissions but the deadline was a mere month later (27 July). Perhaps not surprisingly there were only 38 responses, including the usual suspects such as Shell, Caltex and BP. On the plus side Kay Hull made an excellent and well researched submission - the only Member of Parliament to do so.

Happily the Wagga Fuel Watchdog has been invited to give evidence next Monday, and we welcome the opportunity. What follows summarises our experience, our current concerns, and includes a proposal for systematic price monitoring at the bowser as a means of giving more competitive power to the consumer, particularly the rural consumer.

The current inquiry - the latest of many - was ordered by the Treasurer in mid·June following a request by the ACCC under Part 7 A of the Trade Practices Act. In particular the Commission wanted to know why domestic prices had been rising out of step with benchmark prices in Singapore. To get answers it can force witnesses to testify, subject them to cross­examination, and demand documents.

Although the inquiry is technically proceeding on a fairly narrow front, it seems bound to touch on other aspects of the way Big Oil operates. We shall find this out when the ACCC reports to the Treasurer, but in any case the wider political issues are bound to be raised during the imminent Federal election.

Just for starters we need to know a lot more about the structure of an immensely profitable global industry. It would be helpful to discover:

~ whether genuine competition takes place at the refineries

~ how far wholesale and retail price collusion is standard practice with or without organised cartels

~ if discount vouchers at Woolworths and Coles are undermining competition at the bowsers and favouring an eventual duopoly across the retail fuel market

~ the extent of persistent discrimination against rural consumers who lack bargaining power and face daily price gouging

On all but the last of these issues the Wagga Fuel Watchdog claims no particular expertise. But of one thing we can be certain: motorists (and truck drivers) of Wagga and throughout the Riverina are being taken for mugs at the bowsers.

It was our evidence of discrimination against regional Australia which led to the formation of the Wagga Fuel Watchdog in January 2005, and it's what we'll focus upon at this inquiry. However, our past experience with the ACCC has sometimes been frustrating, and we suggest that additional powers and a radically different approach to monitoring will be needed if real progress is to be made.

,Hard EvLde.nce

Put shortly, competition will only succeed if hard and incontrovertible evidence rep/aces intermittent reports about price disparities at particular times and places.

a mountain of anecdotal evidence, no matter how persuasive it looks at first glance, can at best be only a trigger to obtain the sort of systematic data which has any hope of withstanding legal challenge and so-called black letter judges.

To be fair we had realised this was the way to go back in 2005 when we approached the ACCC to investigate what was happening in our local region. For years we had seen petrol prices moving in lock-step at Riverina bowsers, and at levels well above those experienced in metropolitan areas. Not only were the complaints from consumers loud and clear, not a single motorist ever challenged our allegations.

But we needed incontrovertible proof via objective research. Getting such proof is hard, even daunting, and we simply didn't have the necessary resources. So instead of having to rely on anecdotes we invited the ACCC to use its statutory investigative powers to check the allegations, which if proven would expose uncompetitive behaviour, collusion and even organised price-fixing cartels.

At the time we were aware that starting in 2000 the ACCC had spent years conducting massive investigations in Victoria (at Ballarat and Bendigo), and our optimism soared when a subsequent Federal Court judgement fined the proven price fixers tens of millions of dollars. It seemed the existing Trade Practices Act was adequate to strike down cartels in fuel retailing, with the ACCC prepared to do the hard yards.

The Victorian prosecutions convinced us that gaining the necessary evidence about collusion and cartels required exceptional powers of investigation. The ACCC had such powers, it regarded them as sufficient, and it was prepared to use them.

Insufficient Evidence

Following our invitation two officers met us in Wagga. They agreed to launch a preliminary investigation in secret, but unfortunately a full-scale inquiry never got off the ground because they decided to drop the matter. We were told there was insufficient evidence to proceed, and given the secrecy of the operation we were in no position to disagree. To put it politely we were puzzled, but still optimistic that momentum was building up south of the border.

Then things started to go seriously wrong. The ACCC project in Victoria began to unscramble, and finally collapsed in ignominy and disaster in terms of court costs.

Successive Appeal Court judges threw out the earlier penalties, using an interpretation of the Trade Practices Act which must have left ACCC chairman Graeme Samuel tearing his hair and gnashing his teeth. If so, Mr Samuel wasn't alone.

For example. in the Geelong case which had lasted 31 hearing days, the ACCC produced masses of circumstantial evidence about phone calls between retailers and subsequent price movements. Yet the judge said this didn't amount to collusion because there were no witnesses with first~hand experience of such behaviour. Circumstantial evidence about prices moving in unison wasn't enough.

At the risk of over~simplification, it may walk like a duck, look like a duck and quack like a duck. But until the duck quacks "Guilty M'lord" and voluntarily supplies a recording of its quacks over the phone, it ain't a duck.

More precisely, unless the Commission is given power to record what is actually quacked during the conversations it detects, future investigations are likely to prove equally useless and expensive. Dead ducks, we might say. It will be interesting to see if the incoming Federal government finally grants the ACCC such a long overdue power to tap phones to combat felonies, particularly if labor wins and implements its plan to appoint a specific Petrol Commissioner free to concentrate on Big Oil.

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We shall see, but for the moment and through no fault of its own, the ACCC risks appearing a toothless tiger. Its position has been seriously weakened in the short-term, as shown by its decision not to appeal. It has lost millions of dollars in legal costs, and huge hidden costs in terms of wasted time and embarrassment. Most seriously of all it may hesitate before taking on the oil industry any time soon.

Mr Samuel was reported as saying that "sometimes you lose some." Fair enough, but what happened to "sometimes you win some?"

Meanwhile, back in Wagga during the years since the ACCC chose not to investigate us further, the situation has deteriorated in terms of the petrol price differential with Sydney. This can be seen via the statistical evidence on the Australian Automobile Association's website covering the period 1998 - 2007. Whether they tell the whole story is highly questionable but at least they're a start.

Among the figures are the monthly average price differences between Sydney and various NSW centres including Wagga. if we group these monthly figures to calculate annual average differences, it works out that the difference of 5cpl in 2004 became Scpl in 2005, S.5c in 200S, and 7.8cpl in the first seven months of 2007. Not only is the trend consistently upwards, it has now reached a figure two-and-a-half times greater than the 3cpl differential due to transport costs.

Whether these figures tell the full story is uncertain. This year's differential of 7.8cpl remains well below what anecdotal evidence continues to show, but this uncertainty can only be finally resolved by those with the time, the authority and the statistical expertise to monitor the data properly. But what the Wagga Watchdog can say with little fear of contradiction is that the present situation in Wagga is a disgrace and it is getting steadily worse. With world oil prices inexorably rising in the years ahead, the perpetuation of this inexcusable differential between Sydney and the Bush is fast becoming a national scandal.

Outstanding Issues

Which brings us to three sets of questions.

First, what does the ACCC deduce from its experiences of the past two years in combating cartels and price fixing? What specific additional powers does it consider necessary if it's to stay in business? If, as Mr Graeme Samuel has recently contemplated, following recommendations four years ago by the Dawson Report, jail sentences might be appropriate for collusive market rigging, has this argument been pressed with the law makers? This is surely worth pursuing at the election.

Secondly, how can the Australian government give the country's Competition and Consumer watchdog the teeth it lacks under existing legislation? Can the Trade Practices Act be changed to deny idiosyncratic judges the power to interpret the Act in a whimsical way which mocks the spirit if not the letter of the law?

Thirdly, what is the point of having ritual inquiries in which the ACCC is cast in a reactive rather than a proactive role? Why doesn't the ACCC start the ball rolling with a position paper in which it sets out its own interpretation of the problem - based on the immense amount of information it must surely possess ~ and seeks comments and additional material from the public designed to supplement and/or modify its professional concerns?

In the past thirty years there have been 41 investigations at a federal level and 14 by State courts. Has any evaluation been made of the worth of these inquiries? What policy changes

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followed? Or is it a case of chatter expanding to fill the political vacuum in which Big 011 operates?

The sad fact Is that little that's been said about petrol prices has made much difference. It's been a classic case of groundhog day. So maybe it's time to think outside the box, outside the box stuffed with anecdotal complaints which at least some Federal judges think aren't worth the paper they're written on.

Perhaps, in this so-called information age, we need to identify the all-important missing evidence which is just waiting to be collected and processed via modern sophisticated computers. If knowledge is power, then new knowledge made accessible to the petrol consumer might tip the power scales and permit a genuine free market relationship between consumer and supplier in which competition becomes the norm rather than the exception.

The current situation puts all the bargaining chips in the hands of the supplier. This is a supplier who offers an essential product where substitutes are virtually absent. We purchase this product at a price decided by (effectively) a command economy where competition is almost non-existent. The retail suppliers have few qualms about collusive behaviour. Collusion becomes customary practice via a nod and a wink and a telephone call.

What the Watchdog suggests as a means of changing things is basically very simple:

I We need to exchange the current periodic and irregular sample stUdies of fuel prices with a process of systematic standardized collection combined with continuous revision. Current bowser prices would be automatically transmitted daily from each operator - even several times each day - to a central processor. This would immediately translate incoming data into graphs, diagrams and summary statistics for States, regions, townships and individual fuel outlets which could be accessed on the Net at any time from anywhere.

It may sound complicated, but modem computer technology would easily cope. It would be analogous to the way meteorological data - atmospheric pressure say - from all over Australia is constantly fed into central processors which tum the multitude of figures from each weather station into coherent isobaric charts showing patterns and processes.

In the case of fuel, anyone shopping for petrol could see at a glance on a GPS where petrol is on sale and at what price that particular day. They could see where the cheapest fuel is to be purchased in that vicinity. Even more to the point, if we genuinely wish to stop collusion, the local maps would identify the local price variations from day to day and from bowser to bowser. Angry anecdotes would soon be replaced by printed evidence which even a court of law would find hard to ignore.

In essence, and not before time, this would replace last century's creaking technology with state-of-the-art statistical presentation. It should bring joy to those who struggle to interpret the publicly available data on today's Net, The AAA for example publishes what are described as monthly maximum, minimum and average prices (the results were touched on above in relation to Wagga and Sydney), but unless we know the sampling procedures and the statistical conventions used they are flawed.

Did the maximum or the minimum price quoted for each month survive for hours, days or weeks? Are either of these two prices themselves the averages of the daily fluctuations, or single experiences at particular (sampled?) outlets? How is the monthly average calculated, particularly for the vast number of outlets operating in Sydney with its millions of inhabitants?

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It is as if we were to calculate the average monthly temperature in Wagga by plucking out the maximum and the minimum in one of two randomly sampled suburbs and dividing their sum by two. A classic case of garbage in garbage out.

What we are suggesting would be simple to implement, simple to interpret (particularly compared to what the ACCC had to do so laboriously in Victoria) and it would give the ACCC a powerful capacity to monitor what's happening daily on the roadsides of Australia. If at the same time it gained power to pursue geographic patterns of profiteering by tapping the phones of those whose suspicious behaviour was charted scientifically, the Wagga Watchdog could happily shut up its kennel knowing that the evidence would speak for itself.

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"

ake a stand MOTORISTS of tlw,man,,,,t the Riverina are

at the bowsers, to the Petrol

Watch Committee Members of the commlttee are

residents to turn out in force next Monday's Australian

and Consumer fuel inquirv in

vide the of fuel costs in all parts of Australia. "Current bowser prices would be automatically transmitted

from each operator - even sev-times each day ~ to a central

he said.

fuel in

trans­dia-

::ill:tU::;UC::; for and incH­

outlets which could be accessed on the net at anytime from

prices have been to attend

t • I

ers. "If

include information from watch-

as well as various other wit-nesses called the ACCC.

"While the will trate on the evidence witnesses there may

for residents to voice issues of concern not raised at the conclusion of the hear­

" Member for Riverina Kay Hull

Mrs Hull still all Riyerina residents to attend the

to listen to the issues raised and possibly have the oppor-

to give their own evidence. The public hearing will be held at

teh Street on '¥lVliU('.',

!loon.

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IT IS now or never for Riverina motorists, angry with unchecked m'"fit"",rinn

petrol Next

into The

nOf'rI"tal evidence has been found court battles, in which the Aeee

lost cases against the oil

....

powers, In this electronic age, it should not be difficult for a government to provide the

I III !ill

inquiry, aside, the Aeee needs

the support of all motorists.