Woolworths have applied to the ACCC to be allowed to do the following: they will offer pay-at-the-pump petrol purchasing for holders of their own branded HSBC MasterCard and no one else. Not surprisingly, the banks and other card issuers strongly oppose this. On the face of it, this looks like a bad idea but superficial examinations are not all they seem.
So let’s start with Woolworth’s rationale. According to their submission, it is all about investment. They want to develop a contactless system with sufficient security that no-one else offers and need to recoup their investment by exclusivity. But I must admit that it is hard to imagine that such exclusivity will buy them much. This is especially the case as it stands to reason that the vast majority of their customers are going to be perplexed at being denied an option that exists at other petrol chains.
But the banks’ objections don’t seem on track. They argue that, as a matter of principle, all cards need to be accepted. True, that is how it works but that doesn’t necessarily mean you have to require the same hoops for different customers. Woolworths will continue to accept all other forms of payment — it is just you have to go in the store.
Near as I can tell, Woolworths’ only potential issue is that they want to be stupid (much like eBay did last year) and upset their customers. My guess is that that is their right especially given that they can hardly be said to have market power in petrol retailing.
But it is also the case that they missed an obvious argument. One reason you want to be able to favour your in-house product and exclude others is as a negotiating tool. The banks charge petrol retailers fees for credit card transactions. Well, Woolworths might think those are too high and wants to use pay-at-the-pump as leverage. That is a legitimate tactic but I couldn’t see it argued for at all in Woolworths’ submission. Then they could claim a public benefit by being able to reduce credit card fees which would flow on to petrol prices. Indeed, it was this very possibility, that merchants had their own cards, that the banks argued meant they should be free of regulation because of the competitive pressure it might bring. Without exclusion, it is hard to see what that competitive pressure might be.