Application for authorisation regarding the BP Rewards, Qantas Frequent Flyer and Qantas Business Rewards loyalty programs - PUBLIC VERSION - ACCC
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PUBLIC VERSION
Application for authorisation regarding the BP
Rewards, Qantas Frequent Flyer and Qantas
Business Rewards loyalty programs
BP on behalf of itself,
BP Resellers and Qantas
4 September 2019
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Contents
1 Applicants for authorisation 1
1.1 Contact details 1
1.2 Contact person ;
1.3 Description of business activities ;
1.4 Email address for service 2
2 Executive summary 2
2.1 Proposed conduct 2
2.2 Public benefits 3
2.3 Public detriments 3
3 Confidentiality 4
4 Parties 4
4.1 BP 4
4.2 BP Resellers 5
4.3 Qantas 6
5 Details of the proposed conduct 8
5.1 Basic features of a consumer loyalty program 8
5.2 Basic features of a business loyalty program 9
5.3 Establishment of the BP Rewards Program 10
5.4 Proposed arrangements between BP and BP Resellers regarding the BP
Rewards Program 12
5.5 Qantas' participation in the BP Rewards Program 12
5.6 BP's participation in the QBR Program 14
5. 7 Conduct for which authorisation is sought 15
5.8 Relevant provisions of the Competition and Consumer Act 2010 (Cth) 16
5.9 Rationale 16
5.10 Term of authorisation sought 16
5.11 Request for interim authorisation 17
6 Relevant documents 18
7 Names or classes of persons who may be directly impacted 18
8 Industry background - loyalty programs 18
8.1 Competing loyalty programs 18
8.2 Loyalty programs and retail fuel and convenience markets 22
9 Industry background - fuel and convenience retailing 22
9.1 Competing retail fuel brands 22
9.2 Existing major fuel brand/ loyalty program partnerships 24
10 Market shares and competitive constraints 26
10 .1 Previous ACCC approach 26
10.2 Retail fuel market shares 27
10.3 Competing loyalty programs 28
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11 Public benefits 28
11.1 Overview 28
11.2 Direct consumer benefits 29
11.3 More consistent consumer and business offerings 29
11.4 Enhanced competition in the consumer and business loyalty program sectors 30
11.5 Enhanced competition in retail fuel and convenience markets 31
11.6 Transaction cost savings 32
12 Public detriments (including likely competitive effects) 33
12.1 No discernible detriments 33
12.2 Loyalty program services 33
12.3 Retail fuel and convenience markets 34
13 Contact details of relevant market participants 36
14 Conclusion 36
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1 Applicants for authorisation
1.1 Contact details
Name BP Australia Pty Ltd (ABN 53 004 085 616) (BP) on behalf of
itself, resellers of fuel under the BP brand (BP Resellers),
Qantas Airways Limited (ABN 16 009 661 901) and Qantas
Frequent Flyer Limited (ABN 12 129 456 908) (in this
application, referred to together as Qantas) (collectively, the
Applicants)
Address BP Australia Pty Ltd
Level 17, 717 Bourke Street
Docklands VIC 3008
Telephone (03) 9268 4111
1.2 Contact person
Name Alistair Newton
Position Partner, Corrs Chambers Westgarth
Telephone (03) 9672 3483
Email Alistair Newton@corrs .com.au
1.3 Description of business activities
(a) BP and BP Resellers
BP refines, imports and supplies petrol, diesel and automotive liquid petroleum
gas (referred to collectively as fuel) on a retail and wholesale basis. BP's
relevant business activities include:
• the retail supply of fuel and convenience store items through a
network of BP-branded "company-owned-company-operated"
(COCO) and commission agent (CA) service stations; and
• the wholesale supply of fuel to BP Resellers (i.e., independent
operators of service stations at which fuel is re-sold under the BP
brand), and to distributors that re-sell fuel to BP Resellers.
Further information regarding BP's and BP Resellers' business activities is set
out in sections 4.1 and 4.2 below.
(b) Qantas
Qantas is Australia's largest domestic and international airline. Qantas' core
business activity is the supply of domestic and international air transport
services under the Qantas brand. Qantas also provides low-cost, value-based
air transport services - both domestically and internationally - under its Jetstar
brand through its wholly-owned subsidiary Jetstar Airways.
Qantas operates various airline-related businesses, including in-airport support
services, wholesale and retail travel services, and loyalty program services. In
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respect of loyalty program services, Qantas operates the Qantas Frequent
Flyer program (QFF Program) for consumers and the Qantas Business
Rewards program (QBR Program) for businesses. These programs allow
members to earn points through purchases of Qantas and affiliate airline flights
or from program partners, and to redeem those points for various rewards and
benefits.
Further information regarding Qantas' business activities, the QFF Program
and the QBR Program is set out in section 4.3 below.
1.4 Email address for service
Alistair Newton@corrs .com.au
2 Executive summary
2.1 Proposed conduct
BP proposes to establish a "BP Rewards" loyalty program (BP Rewards
Program). The BP Rewards Program will operate in the same manner as a
typical consumer loyalty program, whereby program members may earn points
by making eligible purchases or taking part in other eligible activities, and then
redeem those points in exchange for various benefits. It is proposed that the
BP Rewards Program will be available at BP and BP Reseller sites.
In addition to participation by BP Resellers, BP intends to appoint various
program partners to the BP Rewards Program. BP intends to appoint Qantas
as the first cornerstone partner of the BP Rewards Program. Under Qantas'
participation, BP Rewards Program members who are also QFF Program
members will be able to elect to directly earn Qantas points instead of BP
points.
It is also proposed that Qantas will appoint BP as a cornerstone partner of the
QBR Program. Under BP's participation in the QBR Program, businesses that
use the BP Plus fuel card at BP and BP Reseller sites will be able to earn
Qantas points on their purchases.
In the above context, authorisation is sought for certain aspects of the
commercial arrangements, including:
• any exclusive dealing conduct that technically arises when BP or a
participating BP Reseller supplies, or offers to supply, benefits to a BP
Rewards Program, QFF Program and/or QBR Program member, or
when BP seeks to make participation in BP Rewards (and, by
extension, the QFF Program) and/or QBR Program mandatory for BP
Resellers;
• co-ordination between BP and BP Resellers regarding their collective
participation in the BP Rewards Program (and, by extension, the QFF
Program) and/or QBR Program; and
• co-ordination between BP and Qantas in respect of the BP Rewards
Program, QFF Program and/or QBR Program, including in relation to
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the rate(s) at which BP or Qantas points may be directly earned and
allocated.
Authorisation in respect of the proposed conduct is sought for 5 years.
2.2 Public benefits
The proposed conduct has a range of public benefits, including:
• the establishment of a new-entrant loyalty program in the BP Rewards
Program;
• direct benefits to consumers (including increased opportunities to
earn and redeem loyalty program points);
• more consistent consumer and business offerings across the BP-
branded network;
• enhanced competition in the consumer and business loyalty program
sectors;
• increased competition in retail fuel and convenience markets; and
• transaction cost savings.
2.3 Public detriments
The proposed conduct will give rise to no discernible public detriment.
In relation to loyalty program services:
• any co-ordination between BP and Qantas will be limited and pro-
competitive;
• no detriment will result to Qantas as a result of any co-ordination
between BP and BP Resellers;
• various third-party loyalty programs, with fuel and convenience-
related partnerships, will continue to compete; and
• related to the above, exclusivity arrangements between BP and BP
Resellers will have a limited impact on third-party loyalty programs.
In relation to retail fuel and convenience markets:
• only a small proportion of overall retail fuel sites in Australia will be
involved in the proposed conduct;
• any co-ordination between BP and BP Resellers will be limited and
pro-competitive;
• participation will be voluntary for consumers and voluntary or
effectively voluntary for BP Resellers;
• impacts on competing fuel and convenience retailers (including non-
participating BP Resellers) will be limited; and
• the proposed conduct will not prevent other competing fuel and
convenience retailers from offering similar benefits to consumers.
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3 Confidentiality
Portions of this document that have been highlighted in red and are preceded
by the word "CONFIDENTIAL:" contain confidential and commercially sensitive
information. Subject to the below, this information must not be disclosed to any
third party without the express written consent of BP and Qantas. BP and
Qantas acknowledge that:
• there is no restriction on the internal use, including future use, that the
ACCC may make of confidential information consistent with the
ACCC's statutory functions;
• confidential information may be disclosed to the ACCC's external
advisors and consultants on the condition that each such advisor or
consultant will be informed of the obligation to treat the information as
confidential; and
• the ACCC may disclose confidential information to third parties (in
addition to its external advisors and consultants) without BP's or
Qantas' consent if compelled by law or in accordance with section
89(7) or section 155AAA of the Competition and Consumer Act 2010
(Cth) (CCA).
4 Parties
4.1 BP
BP's businesses in Australia include the following.
• (Refining) The refining of fuel at its Kwinana refinery in Perth,
Western Australia.
• (Terminals) The operation of fuel terminals in major seaboard cities
via a joint venture with UGL.
• (Retail fuel and convenience- COCO sites) The retail supply of
fuel and convenience store items through BP's own network of 328
COCO sites.
• (Retail fuel - CA sites) The retail supply of fuel through 34 CA sites.
• (Wholesale fuel - direct to BP Resellers) The wholesale supply of
fuel directly to BP Resellers.
• (Wholesale fuel - distributors) The wholesale supply of fuel to a
number of independent distributors that re-sell that fuel to retail
customers through their own retail site networks (i.e., in their capacity
as BP Resellers themselves) and/or to BP-branded sites (i.e., further
BP Resellers) and un-branded independent sites.
• (Commercial bulk fuels) Commercial bulk fuel operations involving
the direct supply of bulk fuels (usually diesel), lubricants and ancillary
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services to commercial customers in the mining, agriculture, aviation,
transport, marine and other industries.
BP supplies, and controls the retail price of, fuel at BP COCO and CA sites
(collectively, BP sites). In doing so, BP competes with BP Resellers in the
retail supply of fuel. Through its COCO sites, BP also competes with BP
Resellers in the retail supply of convenience store items.1
In addition to fuel and convenience store items, BP's retail offer includes the
following elements.
• (BP Plus fuel card) The BP Plus fuel card allows business customers
to purchase fuel, lubricants and other goods and services on account
at any BP-branded retail outlet and to centrally manage their fuel
purchasing. BP Plus fuel cards may be restricted to fuel purchases
only, or may cover other goods and services such as convenience
store items, carwash services, repairs, tyres, batteries and parts.
• (BPme) BPme is BP's mobile fuel payment solution, which allows
customers to pay for fuel from their vehicles. Customers may choose
to download the "BPme" app (for payment with Amex, Visa,
MasterCard and PayPal) or the "BPme for BP Plus Fuel Card" (for BP
Plus fuel card holders). BPme is currently available at 433 BP-
branded sites across Australia.
• (Velocity) BP participates in the Velocity Frequent Flyer program
(Velocity Program), under which Velocity Program members can
earn and redeem Velocity Program points at BP sites. The Velocity
Program is described in further detail in section 8.1 (d) below.
4.2 BP Resellers
Of the 1,451 BP-branded sites in Australia, BP sites account for only 358. The
remaining 1,093 BP-branded sites are operated by BP Resellers.
As independently-owned and operated fuel retailers, BP Resellers conduct
their businesses independently of BP, negotiate their own commercial
contracts with non-fuel suppliers, and, in articular, retain absolute discretion
over their retail fuel ricin .
The commercial relationships between BP and BP Resellers are governed by
Privately Owned Sites Agreements or similar agreements (POSAs), under
which BP agrees to supply BP Resellers with fuels, lubricants and other goods
and services. POSAs provide for a range of rights and obligations, including in
relation to the following.
1
A commission agent for BP could conceivably be argued to be a competitor to BP in relation to non-fuel goods
and services, such as convenience store items. In order to ensure that all relevant arrangements between BP
and its commission agents in respect of the BP Rewards Program, QFF Program and QBR Program are
authorised, references to BP Resellers in this application should be taken to include references to BP
commission agents.
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• (BP Plus fuel card) BP Resellers must accept the BP Plus fuel card and
install, or allow BP to install, an EFTPOS terminal for the purpose of
processing BP Plus fuel card transactions (as well as credit card and
debit card transactions).
• (BPme) BP Resellers may accept payments via BPme, which is
facilitated by optional add-on terms to POSAs for existing BP Resellers.
• (Velocity) BP Resellers may also participate in the Velocity Program
(i.e., offer Velocity Program members the opportunity to earn and
redeem Velocity Program points at their respective site(s)). 787 BP
Reseller sites currently participate in the Velocity Program.
Arrangements relating to BP's and BP Resellers' collective participation
in the Velocity Program are the subject of ACCC authorisations A91485-
A91487 dated 18 August 2015.
On the expiry of a POSA, BP Resellers may choose to enter into a new or re-
negotiated POSA with BP, or enter into a similar arrangement with a wholesale
competitor of BP (e.g., Caltex, Viva, United or Puma).
4.3 Qantas
(a) Overview of Qantas businesses
Qantas' businesses in Australia include the following.
• (Qantas) Qantas operates Australia's largest domestic and
international airline, offering air transport services to destinations
across Australia, Europe, the Americas, the Middle East, Africa, Asia
and the Pacific.
• (Jetstar) The Jetstar Group is Qantas' low-cost, value-based airline
network and consists of wholly-owned subsidiary Jetstar Airways
(Australia) as well as significant minority shareholdings in Jetstar
Asia, Jetstar Pacific and Jetstar Japan.
• (Qantaslink) Qantaslink operates across a network of
approximately 50 metropolitan and regional destinations in Australia.
• (Qantas Loyalty) The Qantas Loyalty business operates the OFF
Program, QBR Program and associated services - see further below.
• (Qantas Freight) Qantas Freight transports over 4,000 freight items
to more than 125 domestic and international destinations daily. It also
operates 22 cargo handling terminals globally.
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(b) QFF Program
The QFF Program is Qantas' primary loyalty program. The QFF Program was
established in 1987. Today, the OFF Program is the core platform for
engaging, rewarding and recognising Qantas Group customers and has over
12 million members from over 100 countries. The OFF Program is run by the
Qantas Loyalty business.
The key elements of the QFF Program are as follows.
• (Membership and account) Membership of the QFF Program is
open to consumers. OFF Program members are assigned a
membership number and select their own PIN, with which they may
log in to the QFF Program website to manage their accounts.
• (Earning points) Members earn points by purchasing Qantas or
affiliate airline flights, or goods or services from OFF Program
partners such Hoyts, Luxury Escapes, Avis, Forty Winks and Airbnb.
Members can also earn points by making purchases with other
retailers via the Qantas Shopping "Online Mall", Qantas Wine and by
using a co-branded credit card issued by a range of major and
regional banks (such as NAB and the Bank of Melbourne) to make
purchases from both partners and non-partners.
• (Redeeming points) Members can redeem points in exchange for a
wide range of benefits, including Qantas or affiliate airline flights or
upgrades, hotel stays, and car hire. Members can also redeem points
in exchange for other goods and services available from the on line
Qantas Shopping "Rewards Store", which stocks goods and services
from suppliers such as Apple, Dan Murphy's, David Jones and fitbit.
(c) Qantas Business Rewards Program
The QBR Program is designed for businesses and complements the QFF
Program. The key elements of the QBR Program are as follows.
• (Membership and account) Membership to the QBR Program is
open to Australian businesses with an ABN. QBR Program members
can access their online QBR Program account to search for and book
flights, automatically access member savings on eligible fares, add
individuals to a stored travellers list, store up to three credit cards, or
view a list of all upcoming flight bookings for their business.
• (Earning points) QBR Program members can earn points on flights
their employees take on services operated by Qantas and affiliate
airlines, which are in addition to the points that an individual can earn
through their membership of the QFF Program. QBR Program
members can also earn points on their everyday business spend
when making eligible purchases from QBR Program partners such as
American Express, Caltex, Dell and Red Energy.
• (Transferring and redeeming points) Points earned through the
QBR Program can be transferred into individual QFF Program
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accounts. Once transferred, points may be redeemed in the usual
way under the QFF Program.
In addition to the above, Caltex StarCard fuel cardholders that are also
members of the QBR Program can link their memberships and earn Qantas
points on purchases of fuel, eligible in-store products and servicing at
participating Caltex-branded sites.
5 Details of the proposed conduct
5.1 Basic features of a consumer loyalty program
As the ACCC is aware, consumer loyalty programs are commonly structured
as programs that reward and encourage consumer behaviours such as the
purchase of goods or services from a particular retailer.
Consumer loyalty programs typically involve the following three types of
participant.
• (Operator) A program operator (e.g., a major retailer or airline) co-
ordinates the program by recording member point balances (earnings
and redemptions), setting and offering point earning rates (and bonus
points offers or benefits where applicable), administering points
earning and redemption payments with participating retail partners,
and licensing intellectual property rights to promote the program.
• (Partners) Program partners such as retailers (including fuel retailers)
participate in the program by offering benefits to members, typically
through the earning or redemption of points. A program operator is
often effectively one of the main partners because it offers the
opportunity to earn and redeem points at its own retail outlets. A
program partner may also be the operator of another loyalty program.
• (Members) Program members (consumers), who join the loyalty
program and who earn points or other benefits in the program in
relation to their eligible transactions or activities which are linked to
their account by the presentation of an identifier (normally in the form
of a membership card or number).
From a member's perspective, a loyalty program will generally (but not always)
involve the following basic processes.
• (Earning points) Members are credited with points in their program
accounts by purchasing eligible goods or services, or taking part in
other eligible activities.
• (Redeeming points) Members are offered benefits or rewards,
usually in the form of discounts or free goods or services, in exchange
for a reduction in the balance of their points accounts. Another
common redemption method is the redemption of points in one loyalty
program for points in a different loyalty program (for example,
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members of the flybuys loyalty program are able to convert their
flybuys points into Velocity Program points).
Loyalty programs generally gather transaction data to enable the fulfilment of
points earning and redemption. A member's account in a loyalty program
typically represents a single pool of points which is added to, or drawn from, via
qualifying transactions or activities with any of the loyalty program's partners.
Benefits can therefore be accessed across partners participating in the
program, usually with no requirement that members' points be used with any
one particular partner (or that points redeemed via a particular program partner
have been earned through purchases from that program partner). Transaction
data can also be analysed for market research and direct marketing purposes.
The rates at which points are earned or redeemed for given values or volumes
of goods or services are agreed between the program operator and the
relevant program partners. For example, it might be agreed that the program
operator will credit a member with one point for every $1 in purchases at a
program partner's stores, and that a discount of $1 will be applied for every 200
points redeemed at that program partner's stores.
The earning of points is typically funded by the program partner whose goods
or services were purchased to earn them. For example, it may be agreed
between a program operator and a program partner that, for every point earned
via purchases at the program partner's stores, the program partner will pay the
program operator a certain amount. The earning of points by a member may
also be funded by the program operator, for example where points may be
earned for purchases of goods or services from the program operator itself, or
for taking part in other activities in relation to the program.
The redemption of points is typically funded by the program operator. For
example, it may be agreed that, for every point redeemed at a program
partner's stores, the program operator will pay the program partner a certain
amount.
5.2 Basic features of a business loyalty program
The structure and operation of a typical Australian business loyalty program
may be similar to that of a typical Australian consumer loyalty program in that
there is an 'operator', there are various program 'partners' and there are also
'members'. However, as the ACCC is aware, there are a number of significant
differences between consumer and business loyalty programs. In particular:
• (Membership) Membership of Australian business loyalty programs, such
as the QBR Program, is generally only available to Australian businesses
with an ABN.
• (Earning points) Business loyalty program members typically earn points
on the goods or services that are purchased by their employees in the
course of their employment. For example, QBR Program members can
earn points on flights their employees take on services operated by Qantas
and affiliate airlines.
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• (Transferring and redeeming points) Business loyalty program members
may be able to transfer points earned through the program to the consumer
loyalty program accounts of their individual employees. This is the case
with the QBR Program, in which Qantas points can be transferred to
individual OFF Program accounts at the discretion of the QBR Program
member.
5.3 Establishment of the BP Rewards Program
BP proposes to introduce the BP Rewards Program at BP and participating BP
Reseller sites.
The BP Rewards Program is proposed to operate in the same manner as a
typical loyalty program, and will incorporate the following key features.
• (Membership) Membership of the BP Rewards Program will be free
(i.e., there will be no joining or periodic membership fees) and open to
all consumers over the age of 16.2 BP will establish a BP Rewards
Program website that will allow consumers to sign up to the BP
Rewards Program, and provide members with the ability to log in and
administer their accounts and view their transaction histories.
Members will automatically be issued with a digital BP Rewards card
when they sign up and will be able to obtain a physical BP Rewards
card from any BP or participating BP Reseller site. It is also
anticipated that, at a later stage, the functionality of the BPme app will
be expanded to include the BP Rewards Program so that customers
who download and register an account via the BPme app will
automatically be opted-in to the BP Rewards Program.
Ill@llllcaring BP points) Members will earn (i.e., have allocated to them
by BP) "BP points" for eligible urchases at BP, BP Reseller and
o, O'0 a
As discussed further below, a key proposed feature of the BP
Rewards Program is that, through the program partnership between
BP and Qantas, common members of both the BP Rewards Program
and the OFF Program will be able to choose which type of points they
would like to earn (i.e., either BP points or Qantas points) when they
make eligible purchases at BP or participating BP Reseller sites.
2 BP may in future offer an enhanced version of the BP Rewards Program, which may involve providing members
with the option to pay an initial and/or ongoing or periodic fee (or pre-payment) to access a higher level of
benefit. It is otherwise currently anticipated that the BP Rewards Program will remain a free program.
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• (Earning bonus points) BP will administer bonus points promotions
from time to time for example, under which members can earn
on an eligible purchase at a BP or participating BP Reseller
site). Bonus points promotions may be targeted, personalised and
offered through direct communications with BP Rewards Program
members, or offered publicly. Bonus points promotions may also
target specific products, locations, and program partners.
• (Eligible purchases) Points will be earned for purchases of fuel and
most convenience store items available from BP and participating BP
Reseller sites, as well as purchases from program partners. Points
will not be earned for the purchase of certain excluded products which
may include, for example: smoking and tobacco products and
accessories; gift cards (including iTunes and fuel vouchers); pre-paid
mobile phones, mobile recharges and pre-paid mobile phone cards;
lottery products; tolls, travel cards and tickets; cash out; delivery
charges; internet cafe services; Australia Post or other parcel locker
services; and any "click and collect" or "home delivery" services.
• (Redeeming points) Members will be able to redeem points in
exchange for various benefits at BP and participating BP Reseller
sites and ro ram artner businesses e .. , ro ram artner gift
• (Member and transaction data) BP may collect, use and disclose
member information for the purposes of administering and facilitating
members' participation in the BP Rewards Program, including for
promotional and marketing purposes.
• (Program partners, including Qantas) In addition to the involvement
of BP Resellers, BP intends to appoint various program partners to
the BP Rewards Program so as to offer a broadly appealing loyalty
program to customers and prospective customers of BP-branded
sites. It is proposed that Qantas will be appointed as the first
"cornerstone" partner of the BP Rewards Program. The proposed
partnership between the BP Rewards Program and the QFF Program
will enable Qantas to promote the benefits of the BP Rewards
Program to potential members in its QFF Program member base,
enabling BP to grow the BP Rewards Program at a faster rate than it
would otherwise be able to in a highly competitive and diverse sector.
• (Velocity) It is proposed that BP and BP Resellers will cease their
participation in the Velocity Program as a result of BP implementing,
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and appointing Qantas as a cornerstone partner of, the BP Rewards
Program.
5.4 Proposed arrangements between BP and BP Resellers
regarding the BP Rewards Program
A BP Reseller's current participation in the Velocity Program is governed either
by a dedicated part of the BP Reseller's POSA, or by a separate "Reseller
Loyalty Agreement". If a BP Reseller is to participate in BP Rewards, then it is
anticipated that any necessary variations will be made to their POSA or
Reseller Loyalty Agreement (or, alternatively, a new Reseller Loyalty
Agreement will be substituted for the existing one). The arrangements to be
agreed between BP and BP Resellers in this context include the following.
• (Mandatory participation) BP may seek to make participation in the
BP Rewards Program mandatory for BP Resellers. However, it is
currently envisaged that participation in the BP Rewards Program will
be voluntary for existing BP Resellers, and will be mandatory only for
new BP Resellers that execute their first POSA.
• (Benefits under the BP Rewards Program) BP and participating BP
Resellers will agree the benefits to be provided to BP Rewards
Program members, including the rates at which points are earned in
relation to fuel and convenience store item purchases, and the value
of discount(s) or other benefits to be given in relation to fuel and
convenience store item purchases upon the redemption of points.
• (Exclusivity) BP and participating BP Resellers will agree restrictions
on BP's and/or BP Resellers' participation in any competing third
party loyalty program(s) (see further section 5.5 below).
• (Data) Participating BP Resellers will provide BP with data generated
in respect of transactions with BP Rewards Program and QFF
Program members (i.e., data in respect of earning and redemption
activities) for the purpose of updating members' accounts with correct
points balances. BP and participating BP Resellers will also agree
restrictions on the supply of data relating to the BP Rewards Program
(including, for example, that BP Resellers will comply with BP
Rewards Program member data consents and not supply data
relating to the BP Rewards Program, and any other customer
personal information, to third parties such as data collection agencies
or market research organisations).
5.5 Qantas' participation in the BP Rewards Program
BP and Qantas have entered into a Loyalty Participation Agreement (LPA),
aspects of which are conditional upon ACCC authorisation. A copy of the LPA
is set out in Confidential Annexure 1.
Pursuant to the LPA, BP Rewards Program members who are also members
of the QFF Program (referred to in this application as common members) will
be able to elect to directly earn Qantas points. This is a unique feature of the
BP Rewards Program in that common members will be able to choose which
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type of points they would like to earn (i.e., either BP points or Qantas points).
Once this election is made, the common member will be able to directly earn
the relevant Qantas or BP points when they make eligible purchases at BP or a
BP Reseller. Common members can change their direct points earning
election in the BP Rewards Program at any time.
The LPA provides the following, amongst other things.
• (BP and BP Reseller network coverage) BP must ensure that all BP
sites are, and continue to be, sites at which common members can
earn Qantas points. BP must also use its reasonable endeavours to
ensure that BP Reseller sites become, and continue to be,
participating sites at which members can earn Qantas points
(including by actively promoting the BP Rewards Program, inclusive
of Qantas' program partnership, to BP Resellers).
• (Qantas earning election) BP will ermit BP Rewards Pro ram
members to earn BP points
1111. In addition, BP will allow common members to elect to directly
earn Qantas points instead of BP points when making eligible
urchases at BP and artici atin BP Reseller sites
Common members will be
free to change their direct earning preferences in the BP Rewards
Program at any time.
• (Allocation of Qantas points) Common members who have elected
to directly earn Qantas points will be able to earn Qantas points
automatically on eligible purchases at participating BP-branded sites
(i.e., those common members will have Qantas points allocated to
them b Qantas at rates a reed between BP and Qantas
• (BP Points redemption) It is proposed that common members who
have not made an election to automatically earn Qantas points may in
future be able to choose to redeem their accumulated BP points for
Qantas points at rates agreed between BP and Qantas.
Ill@lllllRedeeming Qantas points) Once BP and Qantas have completed
the necessary technology and integration works, it is proposed that
common members will be able to redeem Qantas points in exchange
for "dollars off" purchases of qualif in roducts at BP and
artici atin BP Reseller sites
34 78-2765-4157v2 Page 13PUBLIC VERSION
• (Program funding) BP will pay Qantas in respect of each Qantas
point earned by common members at BP and participating BP
Reseller sites, and Qantas will pay BP an agreed rate for those QFF
Program or QBR Program members who choose to redeem Qantas
points at BP sites and participating BP Reseller sites.
• (Exclusivity) BP is obliged to include cert@in s in ©
its relevant a reements with BP Resellers -----
5.6 BP's participation in the QBR Program
Pursuant to the LPA, BP is also proposed to become a cornerstone partner of
the QBR Program so that BP Plus fuel card businesses that are also members
of the QBR Program (referred to in this application as eligible QBR members)
will be able to earn Qantas points. In this respect, the LPA provides the
following.
• (BP and BP Reseller network coverage) It is proposed that all sites
that accept BP Plus as a method of payment, which currently includes
all BP sites and all BP Reseller sites, will participate in the QBR
Program. That is, the QBR Program will be made available across
the BP-branded site network.
Ill@lill=aring and allocating Qantas points) BP will make available to
eligible QBR members with a BP Plus account the ability to directly
earn (i.e., have allocated to them by Qantas) Qantas points on eligible
purchases made on the business member's BP Plus account at rates
a reed between BP and Qantas
• (Program funding) As with Qantas' participation in the BP Rewards
Program, BP will pay Qantas in respect of each Qantas point earned
by eligible QBR Program members at BP and participating BP
Reseller sites.
34 78-2765-4157v2 Page 14PUBLIC VERSION
5. 7 Conduct for which authorisation is sought
Authorisation is sought to implement the arrangements between BP and BP
Resellers, and between BP and Qantas, described in sections 5.4 to 5.6
above, in particular the following.
• (Exclusive dealing) Any exclusive dealing conduct that technically
arises when:
- BP or a participating BP Reseller supplies, or offers to supply,
benefits to a BP Rewards Program, QFF Program and/or QBR
Program member, on condition that the member has acquired
loyalty program services from BP and/or Qantas, or goods or
services from a third party (which may arise where BP or a
participating BP Reseller redeems, or offers to redeem, points
earned via purchases from a third party); or
- BP makes participation in the BP Rewards Program (and, by
extension, the QFF Program) and/or QBR Program mandatory as
a condition of BP's supply of other goods and services to a BP
Reseller.
• (BP and BP Reseller co-ordination regarding BP Rewards) Co-
ordination between BP and BP Resellers in respect of their collective
participation in the BP Rewards Program (and, by extension, the QFF
Program and QBR Program), including in relation to:
the benefits to be provided to consumers and/or businesses
(whether by BP, a participating BP Reseller, or any third party) in
respect of the earning and redemption of BP or Qantas points;
restrictions on BP's and/or BP Resellers' participation in third-
party loyalty program(s); and
- restrictions on BP and/or BP Resellers' supply of data relevant to
the BP Rewards Program to third parties.
• (BP and BP Reseller co-ordination regarding the QFF Program
and QBR Program) Any co-ordination that effectively arises between
BP and BP Resellers regarding their effective participation in the QFF
Program or QBR Program, including in relation to any charge paid to
Qantas in respect of Qantas points earned, or any charge paid by
Qantas in respect of Qantas points redeemed.
• (BP and Qantas co-ordination) Co-ordination between BP and
Qantas in respect of the rate(s) at which:
- Qantas points may be directly earned and allocated by Qantas
under Qantas' participation in the BP Rewards Program;
- BP points may be directly earned and allocated by BP under the
BP Rewards Program; and
- Qantas points may be directly earned and allocated by Qantas
under BP's participation in the QBR Program.
34 78-2765-4157v2 Page 15PUBLIC VERSION
5.8 Relevant provisions of the Competition and Consumer Act 2010
(Cth}
The relevant provisions of the CCA which could or might apply to the proposed
conduct are:
• sections 45AF, 45AG, 45AJ and 45AK in relation to cartel conduct;
• sections 45(1 )(a) and (b) in relation to anticompetitive agreements;
• section 45(1 )(c) in relation to concerted practices; and
• section 47 in relation to exclusive dealing.
5.9 Rationale
5.10 Term of authorisation sought
Authorisation is sou · · · · s
Program
3478-2765-4157v2 Page 16PUBLIC VERSION
-- BP considers a five-year post-launch period to be appropriate in view
of the following.
• (Straightforward and established conduct) As described in section
8.1 below, loyalty programs are a standard feature of the Australian
commercial landscape and have been for an extended period. The
proposed conduct is highly unlikely to alter the structure of the retail
fuel, convenience or loyalty program sectors in any discernible way.
In particular, BP and BP Resellers are already participating in the
Velocity Program, and that participation would simply be replaced by
participation in the BP Rewards (and, by extension, the QFF
Program) and QBR Program. Accordingly, BP submits that the ACCC
is well-placed to assess whether the net public benefits identified in
this application will persist over a five-year timeframe.
• (Five-year authorisation for equivalent arrangements relating to
Velocity Program) Authorisations A91485-A91487 in respect of BP's
and BP Resellers' collective participation in the Velocity Program was
granted in 2015 for a period of five years and, if anything, the ACCC's
ability to assess the net public benefit of such conduct is greater than
it was at that time.
• (Intense competition to persist) The supply of retail fuel and loyalty
program services will clearly remain highly competitive over a five-
year term (and likely in the longer term). In particular, the introduction
of the BP Rewards Program and BP's partnership with Qantas is
likely to prompt renewed investment and innovation in service-based
competition among BP's and Qantas' competitors.
5.11 Request for interim authorisation
Interim authorisation is sought in respect of the proposed conduct insofar as it
relates to BP's participation in the QBR Program, so that it can be launched by
1 February 2020 (ahead of the expiry of the statutory maximum six-month
period for the ACCC's assessment). BP notes that conduct:
• would involve an immediate and direct benefit to BP Plus fuel card
businesses in that it facilitates the earning of Qantas points and
involves no harm to businesses;
• has no potential for significant anti-competitive effects or other public
detriment; and
• is highly unlikely to
relevant market,
3478-2765-4157v2 Page 17PUBLIC VERSION
immediately cease if the ACCC subsequently issues a final
determination refusing authorisation.
6 Relevant documents
The documents prepared by or for BP's senior management for the purposes
of assessing or making a decision in relation to the proposed conduct are the
following (BP notes that these documents contain information that is highly
confidential to BP and should be treated as confidential in accordance with
section 3 above and, in addition, should not be disclosed to Qantas without
BP's prior written consent):
The documents prepared by or for Qantas' senior management for the
purposes of assessing or making a decision in relation to the proposed
conduct, and any minutes or record of the decision made, are the following
(Qantas notes that this document contains information that is highly
confidential to Qantas and should be treated as confidential in accordance with
section 3 above and, in addition, should not be disclosed to BP without
Qantas's prior written consent):
7 Names or classes of persons who may be directly
impacted
The persons who may be directly impacted by the proposed conduct include:
• BP Resellers (see Confidential Annexure 5);
• current and future members of the BP Rewards Program, the QFF
Program and the QBR Program;
• Velocity; and
• current members of the Velocity Program.
8 Industry background - loyalty programs
8.1 Competing loyalty programs
Loyalty programs are a well-established feature of the Australian commercial
landscape. BP estimates that approximately 90% of Australian consumers are
34 78-2765-4157v2 Page 18PUBLIC VERSION
enrolled in at least one loyalty program,3 and that the average consumer is a
member of approximately 4.3 loyalty programs.4
The loyalty program sector is broad and diverse, and is characterised by a
number of sophisticated program operators with a wide range of loyalty
offerings. The sector includes competing retailer-aligned loyalty programs
(e.g., Woolworths Rewards), loyalty programs linked to the use of a particular
credit card (e.g., NAB Rewards), and airline-aligned loyalty programs (e.g., the
Velocity Program and KrisFlyer). As a result, consumers have a broad range
of choice in terms of loyalty program participation.
The sector is also innovative and dynamic. In recent times, some loyalty
program operators have also moved to subscription-based loyalty models (e.g.,
Amazon Prime) that offer discounts or benefits (such as free delivery) to
subscribers.
Further information regarding some of the major loyalty programs offered in
Australia is provided below.
(a) Altitude Rewards
Altitude Rewards is a loyalty program launched by Westpac in 2001. Members
earn Altitude Rewards points from purchases made using Westpac-issued
Altitude credit cards. Bonus points are also available from time to time in
connection with special promotions.
Altitude Rewards points can be redeemed for a wide range of benefits
including flights, shopping vouchers and Westpac financial products. Altitude
Rewards points can also be exchanged for points in six different frequent flyer
programs including the QFF Program, the Velocity Program, Malaysia Airlines'
Enrich program, Air New Zealand's Airpoints program, Singapore Airlines'
KrisFlyer and Cathay Pacific's AsiaMiles program. Altitude Rewards also
offers a "Pay with Points" option allowing members to redeem points for
statement credits to their Westpac-issued credit card account.
For further information regarding the Altitude Rewards program, see
https://altituderewards.com .au/.
(b) flybuys
The flybuys program was launched in 1994 and is one of the largest loyalty
programs in Australia, with approximately 8 million active members, covering
approximately six million households. flybuys was previously a business unit of
Coles (which was itself a wholly-owned subsidiary of Wesfarmers). Following
the demerger of Wesfarmers' Coles division in November 2018, Wesfarmers
and Coles each hold a 50% stake in flybuys.
The flybuys program allows members to earn points by purchasing goods or
services from a range of partners, or by using a co-branded Coles/MasterCard
3
See for example: https://www .finder.eom.au/9-in-10-australians-belonq-to-a-loyalty-proqram.
4
See for example: The Point of Loyalty, For Love or Money 2019- Australia: Comprehensive report,
https://thepointofloyalty.com.au/ (For Love or Money, 2019).
3478-2765-4157v2 Page 19PUBLIC VERSION
credit card to make purchases from partners and non-partners. flybuys has a
well-established and varied portfolio of partners, which currently include Coles,
Coles Express, Target, Kmart, Liquorland, AGL, eBay and Medibank. flybuys
members who are also members of the Velocity Program may link their
accounts and convert their points into "Velocity Points" for redemption in that
program.
Members can redeem points by selecting goods or services available from the
online flybuys store, or by redeeming points in exchange for "flybuys dollars" to
be used in-store at Coles Group retail outlets (e.g., Coles, Target, Kmart and
Liquorland).
For further information regarding flybuys, see https://www.flybuys.com.au.
(c) MYER one
The MYER one loyalty program was launched by Myer in 2004.
Members earn points {known as "shopping credits") by making purchases at
Myer stores and at partner retailers (such as Caltex and Star Mart, IGA
supermarkets, Hertz, Air New Zealand, helloworld and Wilson Parking).
Members may also earn points by making purchases from partners and non-
partners using a MyerNisa co-branded credit card. Once a member earns
2,000 points, they are provided with a $20 credit that can be redeemed at Myer
stores or through the Myer on line store. The MYER one program has
approximately 5 million members.
MYER one members are also eligible for other benefits, including member-only
discounts and invitations to Myer special events.
For further information regarding the MYER one program, see
https://www.myerone.corn.au/home.
(d) Velocity Program
The Velocity Program is operated by Velocity Frequent Flyer Pty Limited
(Velocity), a company majority owned by Virgin Australia Holdings, and was
launched in 2005.
Members earn "Velocity Points" by purchasing Virgin Australia or affiliate airline
flights (including Virgin Atlantic, Etihad Airways, Tigerair and Delta Airlines), or
goods and services from Velocity Program partners (including BP, Europcar,
Hertz, Thrifty, Intercontinental Hotels). The Velocity Program also allows
members to earn points by making purchases using a Velocity co-branded
credit card (whether from a Velocity Program partner or otherwise). As noted
above, flybuys members who are also Velocity Program members may link
their accounts and convert their flybuys points to Velocity points for redemption
in the Velocity Program.
Velocity Points can be redeemed in exchange for tickets or airfare upgrades on
Virgin Australia or affiliate partner flights, goods and services from the on line
Velocity Frequent Flyer Rewards Store, or free or reduced-cost goods and
34 78-2765-4157v2 Page 20PUBLIC VERSION
services from partners. The Velocity Program has approximately 9.5 million
members.
For further information regarding the Velocity Program, see
https://experience.velocityfrequentflyer.com/.
(e) Woolworths Rewards
The Woolworths Rewards program was launched in 2008 (as "Everyday
Rewards), and is owned and operated by the Woolworths Group.
The Woolworths Rewards program allows members to earn points by making
qualifying purchases at Woolworths supermarkets, as well as affiliated liquor
stores and fuel outlets (including BWS, participating Caltex and Caltex-
Woolworths co-branded fuel outlets, and BIG W).
Members can redeem points in exchange for a range of benefits including
discounts on Woolworths supermarket purchases.
As mentioned above, Woolworths Rewards program members currently have
the ability to redeem Woolworths Rewards program points for Qantas points if
they have selected Qantas points as their preferred reward redemption option
for their Woolworths Rewards points. This redemption process occurs on a
quarterly basis.
The Woolworths Rewards program has approximately 11.3 million members.
For further information regarding the Woolworths Rewards program, see
https://www.woolworthsrewards.com.au/.
(f) Other loyalty programs
Various other loyalty programs are available to Australian consumers, including
the following.
• (Priceline Sister Club) Priceline Sister Club is a free loyalty program
operated by Priceline (a company owned by Australian
Pharmaceutical Industries Limited). The Priceline Sister Club has
approximately 7.2 million members in Australia and provides
discounts to customers shopping at Priceline stores, or with various
other partners during promotional periods.
• (IGA Rewards) IGA Rewards is a free loyalty program offered at
various participating IGA stores around Australia. Members of the
IGA Rewards program receive benefits and discounts on their
shopping at IGA supermarkets, including automatic entries into IGA
competitions and access to deals from partners (such as discounts on
travel and holiday packages).
• (David Jones Rewards) David Jones recently launched the David
Jones Rewards loyalty program, which provides members with
exclusive offers, access to events, and instantly-redeemable rewards
without minimum spend or points requirements. Members will also
receive automatic entry into a monthly draw to win David Jones gift
3478-2765-41572 Page 21PUBLIC VERSION
cards when they make a purchase in-store. BP estimates that the
program currently has approximately 3 million members.
• (Other credit card I bank operated loyalty programs) A number of
credit card and bank operated loyalty programs are also available,
including:
- ANZ Rewards (operated by ANZ, it provides benefits that can be
redeemed at partner retailers such as Myer, David Jones and JB
Hi-Fi);
- CommBank Rewards (operated by Commonwealth Bank, it
provides the ability to redeem points at partner retailers such as
Myer and Flight Centre);
- David Jones American Express Card (operated by David Jones
with American Express, it provides benefits that can be redeemed
at David Jones stores or other partners including Ticketmaster,
Hoyts Cinemas, Singapore Airlines); and
- NAB Rewards (operated by National Australia Bank, the NAB
Rewards offers benefits that can be redeemed with partner
retailers such as Webjet, Myer, David Jones, Bunnings, Mitre 10
and the Australian Football League).
8.2 Loyalty programs and retail fuel and convenience markets
9 Industry background - fuel and convenience
retailing
9.1 Competing retail fuel brands
At the retail level, BP and BP Resellers compete vigorously against a large
number of alternative fuel sites operating under various competing brands,
including an increasing number of agile, small independent competitors with a
particular focus on discounting. BP's key competitors are listed below, many of
which currently have partnerships with existing major loyalty programs or offer
their own loyalty services.
• (Caltex) The Caltex-branded network is comprised of approximately
1,394 sites (representing 19% of total sites nationally, or 17-38% of
3478-2765-4157v2 Page 22PUBLIC VERSION
total sites in each State and Territory except for the Northern
Territory, where it represents 5% of sites). These sites are either
owned and operated by Caltex Australia, or by independent retailers
who re-sell fuel under the Caltex brand (BP understands that this is
also the case for other retailers listed below, such as United, Puma
and Metro). Caltex also supplies fuel to Woolworths-branded sites (at
which consumers are able to participate in the Woolworths shopper
docket discount scheme and Woolworths Rewards loyalty program).
Caltex also participates in the MYER one loyalty program, Altitude
Rewards, and the QBR Program (as described in section 9.2 below).
• (Viva Energy / Coles Express) The Coles Express network consists
of approximately 715 sites (approximately 13% of retail fuel sites).
Shell-branded fuel is supplied from these sites by Viva Energy under
a commission agent model, where Viva Energy sets the price of fuel.
Coles Express also includes a convenience store offering supported
by its integration with Coles supermarkets, offers discounts on fuel to
consumers under its own shopper docket discount offer, and
participates in the flybuys loyalty program (including by allowing
flybuys members to convert shopper docket discounts offered under
Coles' scheme to flybuys points). Viva Energy has also announced
an arrangement with carsales.com Ltd (carsales), under which Viva
will join carsales' member benefit program to provide a range of offers
including fuel discounts at Coles Express sites.5
• (Viva Energy/ Liberty) Viva Energy also owns and operates the
Liberty Oil network of retail fuel sites, which consists of approximately
148 Liberty-branded sites (approximately 2% of retail fuel sites)
across a number of Australian states centred mainly in Victoria and
NSW.
• (Woolworths) The Woolworths-branded retail fuel network currently
consists of 536 sites throughout Australia (representing approximately
8% of retail fuel sites in Australia), which sell Caltex-branded fuel.
Woolworths recently sold this network to EG Group, which retains the
Woolworths' shopper docket and Woolworths Rewards loyalty
offerings.
• (7-Eleven) The 7-Eleven retail fuel network consists of approximately
547 retail fuel sites (approximately 8% of overall site share in
Australia). 7-Eleven sites sell Mobil-branded fuel. 7-Eleven has a
broad convenience store offering at its retail fuel sites, and also
operates a large network of non-fuel convenience store sites.
• (United) The United Petroleum retail fuel network consists of
approximately 433 sites (approximately 6% of the total number of
retail sites in Australia). United has adopted various discounting
5
See https://www.vivaenergy.com.au/about-us/media-centre/news/201 9/yiya-energy-signs-deal-that-will-
enhance-benefits-to-carsales-members.
3478-2765-4157v2 Page 23PUBLIC VERSION
initiatives at its retail sites. United offers the United Club Rewards
loyalty program.
• (Puma) The Puma Energy network consists of approximately 327
retail fuel sites in Australia, which are branded as either Puma (279
sites), Gull (28 sites), Matilda (12 sites) or Choice (8 sites).
• (Metro) Metro Petroleum has a network of approximately 199
branded retail fuel sites in the eastern States of Australia (mainly
centred in Sydney and regional NSW).
• (Freedom Fuels) Freedom Fuels operates a network of
approximately 57 controlled or branded sites in Queensland. It also
provides a fuel card allowing business consumers to purchase fuel on
credit, and which provides access to discounts based on fuel volumes
purchased.
• (Mogas) Mogas Regional is a private company that operates
approximately 17 Mogas-branded retail fuel sites in Adelaide and
regional South Australia. Certain sites participate in the Drakes
Supermarkets shopper docket discount scheme.
• (Westside) Westside Petroleum's retail fuel network consists of
approximately 26 sites in Sydney and regional NSW.
• (Costco) Costco sells Mobil fuel at the retail level at eight of its
warehouse locations in Canberra (ACT), North Lakes (QLD),
Crossroads (NSW), Adelaide (SA), Moorabbin (VIC), Marsden Park
(NSW), Epping (VIC) and Ipswich (QLD).
9.2 Existing major fuel brand / loyalty program partnerships
Loyalty programs are a well-established feature in retail fuel and convenience
markets, reflecting the broader retail sector. Table 1 below further outlines the
existing partnerships between fuel brands and loyalty programs, and their
current loyalty offerings.
Table 1-- Existing partnerships between fuel brands and loyalty programs
Major fuel brand Loyalty program partnership(s) and current offers
BP • Velocity Program: earn two "Velocity Points" for every litre of fuel
purchased (up to 150 litres); earn two Velocity Points for every $1 spent
in-store (up to $100).6
Caltex • MYER one: earn one "Shopping Credit" for every $1 spent.
6
As discussed in sections 4.2 and 8.1 (d), it is proposed that, subject to ACCC authorisation, BP will cease its
participation in the Velocity Program and instead launch the BP Rewards Program, appoint Qantas as a
cornerstone partner of the BP Rewards Program, and be appointed as a cornerstone partner of the QBR
Program.
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