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

2

1.1 Contact details 1.2 Contact person 1.3 Description of business activities 1.4 Email address for service

Executive summary

1 ; ; 2

2

3

2.1 Proposed conduct 2.2 Public benefits 2.3 Public detriments

Confidentiality

2 3 3

4

4 Parties 4

5

4.1 BP 4.2 BP Resellers 4.3 Qantas

Details of the proposed conduct

4 5 6

8

5.1 Basic features of a consumer loyalty program 5.2 Basic features of a business loyalty program 5.3 Establishment of the BP Rewards Program

8 9

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

6

5.10 Term of authorisation sought 5.11 Request for interim authorisation

Relevant documents

16 17

18

7 Names or classes of persons who may be directly impacted 18

8 Industry background - loyalty programs 18

9

8.1 Competing loyalty programs 8.2 Loyalty programs and retail fuel and convenience markets

Industry background - fuel and convenience retailing

18 22

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9.1 Competing retail fuel brands 9.2 Existing major fuel brand/ loyalty program partnerships

10 Market shares and competitive constraints

22 24

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10 .1 Previous ACCC approach 10.2 Retail fuel market shares 10.3 Competing loyalty programs

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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

12 11.6 Transaction cost savings

Public detriments (including likely competitive effects) 32

33

12.1 No discernible detriments 12.2 Loyalty program services 12.3 Retail fuel and convenience markets

13 Contact details of relevant market participants

33 33 34

36

14 Conclusion 36

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1 Applicants for authorisation 1.1 Contact details

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)

BP Australia Pty Ltd Level 17, 717 Bourke Street Docklands VIC 3008

Telephone (03) 9268 4111

1.2 Contact person

Name

Address

Name

Position

Telephone

Email

Alistair Newton

Partner, Corrs Chambers Westgarth

(03) 9672 3483

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

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•

•

(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 ©l' 2l9@l9gs 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.

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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.

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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:

5.9

• 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.

Rationale

5.10 Term of authorisation sought Authorisation is sou · · · · s Program

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-- 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,

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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

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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).

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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

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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

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8.2

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).

Loyalty programs and retail fuel and convenience markets

9

9.1

Industry background - fuel and convenience retailing 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

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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.

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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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Major fuel brand Loyalty program partnership(s) and current offers

• Altitude Rewards: earn one Altitude point for every $1 spent.

• Qantas Business Rewards (where Qantas Business Rewards and Caltex StarCard memberships are linked): earn one Qantas point per litre of Vortex Premium or per two litres of regular fuel; earn one Qantas point for every $1 spent on eligible in-store products; and earn one Qantas point for every $1 spent on servicing.

• Woolworths Rewards: earn one Woolworths point for every $1 spent on fuel and in-store at participating Caltex sites, as well as at Star Mart and The Foodary. Woolworths points may subsequently be redeemed for Qantas points on a quarterly basis where the Woolworths Rewards program member has elected to do so.

• Fuel Pay: the Caltex FuelPay app allows members to pay for fuel via the comfort of their vehicles and is expected to soon be integrated with the Woolworths Rewards program.

• NRMA Insurance: members can obtain discounts up to 5cpl on Vortex Premium or 3cpl on regular fuel at participating Caltex sites.

• EasyFuel Card: members can scan their card when making purchases at participating stores to obtain a corresponding cpl fuel discount at Caltex sites (up to 50 litres, within 60 days).

• myToyota: Toyota drivers can obtain 4cpl discounts on fuel purchases (up to 150 litres) at participating Caltex sites.

• Hyundai Auto Link: Hyundai drivers can obtain 4cpl discounts on fuel (up to 120 litres) at participating Caltex sites.

Woolworths • Qantas Frequent Flyer (where Qantas Frequent Flyer and Woolworths Rewards memberships are linked): for every 2,000 Woolworths points accrued, customers can redeem these for 870 Qantas points. Woolworths Rewards points cannot currently be redeemed for "dollars off' at any Caltex- or Caltex-Woolworths-branded sites.

Coles Express / Shell

• flybuys: earn one point for every $2 spent (which includes fuel purchases). flybuys points can then be redeemed for "flybuys dollars" at the rate of 2,000 flybuys points for $10 in flybuys dollars, which can be used at Coles Express sites. The flybuys loyalty app also offers infrequent Coles Express offers.

• EasyFuel Card: members can scan their card when making purchases at participating stores to obtain a corresponding cpl fuel discount at participating Shell sites (up to 50 litres, within 60 days).

Puma • Puma Local Rewards: obtain discounts of up to 4cpl for every litre

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Major fuel brand Loyalty program partnership(s) and current offers

purchased up to 80 litres of petrol/diesel, at participating Puma sites (and up to 6cpl at Puma's Woree site).

• RAC: members can obtain 4cpl discounts on fuel (up to 120 litres) at participating Puma sites in Western Australia.

• RACQ: members can obtain 4cpl discounts on fuel (up to 120 litres) at participating Puma sites across Australia.

• PUMA Card: offers members rebates with partners including Supercheap Auto, Bridgestone, Beaurepaires, Ultra Tune and Lube Mobile.

United • United Club Rewards: members of the Collingwood Football Club can obtain discounts up to 4cpl for every litre of fuel purchased (up to 150 litres) at certain United sites.

• Community Rewards: United offers discounts of 2cpl for individual customers with United Fuel Discount Cards and 2cpl for their eligible community clubs, schools and charities, such as the South East Juniors football club.

Liberty • EasyFuel Card: members can scan their card when making purchases at participating stores to obtain a corresponding cpl fuel discount at participating Liberty sites (up to 50 litres, within 60 days).

Costco • Costco membership: members can obtain cheaper petrol if they purchase their fuel from Costco sites (which offer Mobil fuel).

10 Market shares and competitive constraints 10.1 Previous ACCC approach

In the BP/Velocity authorisation,' the ACCC considered the relevant conduct in the context of the retail supply of fuel and the supply and/or acquisition of loyalty program services. Further, in the BP/Woolworths authorisation,8 the ACCC considered the relevant areas of competition included the retail supply of fuel, the supply and/or acquisition of convenience groceries, and the supply and/or acquisition of loyalty program services.

BP considers that it is not necessary for the ACCC to precisely define the relevant market for the purpose of assessing its application for authorisation. However, BP submits that the ACCC should have regard to the impact of the proposed conduct on competition for:

7 Authorisations A91485-A91487. 8 Authorisations A91580-A91582.

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• the retail supply of fuel, convenience store items and ancillary services; and

• the supply or acquisition of loyalty program services (from the perspective of loyalty program operators, actual or potential loyalty program partners, and consumers).

10.2 Retail fuel market shares Table 2 below sets out high-level estimated shares of retail fuel volumes and sites by brand. As Table 2 illustrates, BP-branded petrol stations account for only approximately 19% of all sites in Australia and 23% of fuel volumes.

BP notes that the estimates set out in Table 2 are likely to overstate BP­ branded volume and site shares and do not reflect BP's own market position, since BP sites (as distinct from BP Reseller sites) represent only ~7% of sites.

Table 2- Estimated shares of retail fuel volumes and sites, Australia-wide by major fuel brand

Fuel brand Share of volume Share of sites

BP (BP and BP Resellers)

Caltex

Coles Express/ Shell (Viva)

Costco

Freedom Fuels

23%

18%

14%

19%

19%

13%

Liberty

Metro

Mogas

Other

<1%

<1%

1%

4%

<1%

4%

4%

<1%

1%

2%

2%

<1%

Puma

Westside <1%

Woolworths

United

7-Eleven

14%

5%

9%

15%

4%

<1%

8%

6%

8%

Source: BP estimates based on publicly available information.

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10.3 Competing loyalty programs Table 3 below sets out estimated memberships bases for the major loyalty programs.

Table 3 - Estimated major loyalty program membership bases

Loyalty program Members (approx.)

QFF Program / QBR Program 12 million individuals/ 250,000 businesses

Woolworths Rewards 11.3 million Mg.

Velocity Program 9.5 million

flybuys 8 million

Priceline Sister Club 7.2 million

MYER one 5 million

David Jones Rewards 3 million JANIA»IANNI

Source: BP estimates from publicly available information.

BP notes that Table 3 above does not include every loyalty program currently available to consumers in Australia. For example, there are various other loyalty and rewards programs referred to in sections 8.1 and 9.2 above for which BP cannot provide approximate membership numbers (e.g., Altitude Rewards).

11 Public benefits 11.1 Overview

The various elements of the proposed conduct described in sections 5.4 to 5.6 will, if implemented, operate as a cohesive whole. In that context, BP does not consider it appropriate to adopt a mechanical analytical approach by which public benefits are assessed separately for each element of the proposed conduct (and, in any event, no single element of the proposed conduct results in any discernible public detriment).

Adopting that approach, BP submits that the conduct described in sections 5.4 to 5.6 above will result in significant public benefits, including:

• the establishment of the BP Rewards Program as a new entrant in the loyalty program sector in Australia. The BP Rewards Program will generate direct consumer benefits arising from the ability to directly earn and redeem BP points and Qantas points at BP and participating BP Reseller sites;

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• a consistent loyalty program offering across BP-branded sites, which lowers consumer search costs and reduces the prospect of consumer confusion;

• enhanced competition in the supply of loyalty program services;

• enhanced competition in retail fuel and convenience item markets; and

• transaction cost savings which, in the context of highly competitive retail fuel markets, can be expected to be passed on to consumers.

11.2 Direct consumer benefits As noted above, the BP Rewards Program will be a new entrant in the loyalty program sector. The proposed partnership between the BP Rewards Program and the OFF Program will enable BP to grow the BP Rewards Program at a faster rate than it would otherwise be able to, thereby allowing the BP Rewards Program to become established and compete more effectively in this highly diverse and competitive sector. The proposed conduct will deliver to consumers new opportunities to:

• directly earn either BP or Qantas points on eligible purchases from BP and participating BP Reseller sites under the BP Rewards and OFF Program at a broader range of locations and at no additional cost compared to non-members who acquire the same goods and services;

• redeem BP points or Qantas points in exchange for goods or services from BP and participating BP Reseller sites;

• redeem points in exchange for various other discounts and rewards (such as discounts off subsequent eligible purchases); and

• redeem loyalty program points (i.e., from BP points to Qantas points), providing customers with greater flexibility in terms of how they earn and redeem those points.

The ACCC has previously accepted that consumers' ability to earn loyalty program points on a wider range of purchases and at a broader range of locations constitutes a public benefit.9

11.3 More consistent consumer and business offerings The proposed conduct will allow the benefits of the BP Rewards, OFF Program and QBR Program to be offered more consistently across the BP-branded network than if BP Resellers were to negotiate their participation in the OFF Program and/or QBR Program in those programs independently. This benefits consumers and businesses in a number of ways, including by:

• clarifying the manner in which the benefits of BP's and participating BP Resellers' participation in those programs are communicated to consumers and businesses;

9 Authorisation A91485-A91487, final determination, page 8.

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• according with consumer expectations that BP-branded sites will generally participate in promotions that are advertised in relation to the BP brand; and

• reducing the extent to which consumers need to seek out BP-branded sites at which BP Rewards, OFF and QBR Program benefits are offered.

BP notes that the ACCC has previously accepted that collective negotiation and potential mandatory loyalty program participation by BP Resellers was likely to result in a more consistent product and service offering across the BP­ branded network, which may benefit customers and increase the competitiveness of the BP-branded network as a whole.'©

11.4 Enhanced competition in the consumer and business loyalty program sectors BP considers that the proposed conduct will improve the attractiveness of the BP Rewards Program and OFF Program to consumers and the attractiveness of the QBR program to businesses. Indeed, BP and BP Reseller participation in the BP Rewards Program (and, by extension, the QFF Program and QBR Program) effectively facilitates BP's entry into the loyalty program sector.

BP anticipates that the link between the BP Rewards Program and the OFF Program will allow BP to better market the benefits of BP Rewards Program membership to potential members. Given that the BP Rewards Program will be a new entrant in the sector, the ability to engage Qantas to market the BP Rewards Program to the OFF Program's member base is a compelling opportunity. Similarly, Qantas will also be able to market the opportunity for existing and potential members to earn Qantas points for purchases of fuel and convenience store items from BP and BP Resellers.

Further, because the BP Rewards Program and the OFF Program are structured to offer a direct earn proposition, there will be on-going competition between the two programs. This competition will arise as common members make their initial direct earn election, are offered the on-going opportunity to alter that choice, and in the context of any subsequent ad hoc redemption of BP points to Qantas points.

BP notes that the ACCC has previously determined that the ability to earn Velocity points for purchases of BP fuel was likely to be valued by consumers, improve BP-branded sites' retail competitiveness, and would improve the competitiveness of the Velocity Program itself (which may facilitate competitive responses from other loyalty programs).11

Further, BP notes that the anticipated redemption value of points earned via the B ewards Pro r · · · · · · ther . .

10 Authorisation A91485-A91487, final determination, page 10. 11 Authorisation A91485-A91487, final determination, page 8.

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Business loyalty programs also deliver significant benefits by allowing businesses to obtain benefits and potential savings that they would not have access to in the absence of the loyalty program. The proposed membership of BP in the QBR Program will result in BP making 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. This opportunity would not be available in the absence of BP becoming a 'cornerstone' partner of the QBR Program.

11.5 Enhanced competition in retail fuel and convenience markets BP considers that the proposed conduct will further enhance competition in retail fuel and convenience markets, given that the benefits available under loyalty programs are valued highly by consumers.

As noted above, the ACCC has previously determined that the ability to earn loyalty program points for purchases of fuel was likely to be valued by consumers and improve BP-branded sites' retail competitiveness,'° and that the benefits resulting from a more consistent loyalty program offering would increase the competitiveness of the BP-branded network as a whole.14 The ACCC has also previously considered that the ability to earn loyalty program points on purchases of fuel is more likely to elicit competitive responses from other fuel retailers, particularly if they are able to find commercial partners that enable them to offer the same or similar benefits.15

BP considers that the establishment of the broad range of loyalty programs identified in section 8.1 above has created an environment in which consumers increasingly expect to be rewarded for their purchasing behaviours. In this way, BP considers that the proposed conduct will cause other fuel and convenience retailers to reassess the competitiveness of their loyalty program offerings, particularly in relation to the redemption of loyalty program points at petrol stations, and to consider improving those offerings. For example, it is conceivable that:

• a competitor of BP may seek to participate in the Velocity Program, noting that as a result of the termination of BP's arrangements with Velocity, a competitor may be able to enter into arrangements with Velocity as its rewards partner (BP considers it highly likely that Velocity will be able to enter into a partnership with a competing fuel retailer upon the termination of its partnership with BP);

12

13 Authorisation A91485-A91487, final determination, page 8. 14 Authorisation A91485-A91487, final determination, page 10. 15 Authorisation A91580-A91582, final determination, page 16.

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• other fuel and convenience retailers may begin to allow members of competing loyalty programs to directly redeem points for fuel discounts at the point of sale, or other promotional offers (e.g., Coles Express may begin to allow flybuys members to directly redeem their points for fuel discounts, rather than requiring members to first convert their flybuys points to "flybuys dollars", which can then be used on purchases of fuel at Coles Express), or enhance their existing retail fuel/convenience and loyalty offerings; and

• competing fuel retailers such as 7-Eleven, United or Puma may choose to partner with a new loyalty program operator and allow loyalty program points to be earned and/or redeemed at their respective fuel sites.

BP notes that the proposed conduct does not affect or limit other fuel retailers' ability to implement these, or equally competitive, loyalty offerings (and will, in fact, encourage competitors to do so, given the extremely vigorous nature of competition in retail fuel markets).

11.6 Transaction cost savings Qantas' participation in the BP Rewards Program will allow a relatively large number of BP-branded sites (including BP and participating BP Reseller sites) to improve the competitiveness of their operations, without the need for individually negotiated loyalty program arrangements with Qantas. BP notes that in its Velocity determination, the ACCC considered that the Velocity Program was likely to be more broadly adopted, and implemented more effectively and efficiently, under the proposed collective arrangements than if BP and each participating BP Reseller negotiated with Velocity separately.16

Although BP has not attempted to quantify the transaction costs likely to be avoided (particularly by participating BP Resellers), BP anticipates that, in the absence of collective participation by BP Resellers, those BP Resellers would incur significant costs on an individual basis when negotiating with Qantas. The ACCC has also previously determined that the collective negotiation of terms is likely to result in public benefits from sharing the costs of negotiation, which in turn increases the likelihood that more contractual issues can be addressed in a comprehensive and efficient manner.17

It is also arguable that, in the absence of collective participation, a proportion of participating BP Resellers would simply be unable to conclude arrangements with Qantas (or any similar loyalty program operator), and would retain their relevant competitive disadvantages.

16 Authorisation A91485-A91487, final determination, page 8. 17 Authorisation A91485-A91487, final determination, page 9.

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12 Public detriments (including likely competitive effects)

12.1 No discernible detriments BP submits that the proposed conduct described in sections 5.4 to 5.6 above will result in no discernible public detriments in the supply of retail fuel or loyalty program services.

12.2 Loyalty program services To the extent that the proposed conduct involves co-ordination between Qantas, BP and/or participating BP Resellers in relation to the terms on which they participate in the BP Rewards, QFF Program and/or QBR Program, no public detriments will result for the following reasons.

• (Limited and pro-competitive co-ordination between BP and Qantas) The co-ordination between BP and Qantas proposed in sections 5.3 to 5.6 above is confined to that which is strictly necessary to establish and operate the BP Rewards Program as contemplated by the LPA, and to achieve the public benefits set out in section 11 of this application. No broader co-ordination in relation to any other aspect of BP's or Qantas' operations is contemplated. BP submits that any contraventions of the CCA arising from the proposed conduct are entirely technical in nature and result in no substantial lessening of competition. Indeed, as set out in section 11, the proposed conduct will produce pro-competitive outcomes, the most discernible of which will be the establishment of a new Australian loyalty program for local consumers. Further, the direct earn proposition facilitates consumer choice, both at the initial earn election point and thereafter, with common members able to switch between programs at their discretion.

• (No detriment to consumers) Loyalty programs deliver significant benefits to the public by allowing consumers to obtain benefits and material savings on expenses that they would not have access to in the absence of the loyalty program. The proposed conduct will not result in any adverse impact to consumers for the following reasons:

- consumers will remain free to acquire goods and services from Qantas without acquiring any goods or services from BP or participating BP Resellers (and vice versa);

- consumers may continue to acquire goods and services from BP and participating BP Resellers without being a QFF Program member, or availing themselves of any of the benefits of those programs (and vice versa); and

- consumers will not be restricted in becoming members of other loyalty programs that compete with the BP Rewards or QFF Program (and in any event are likely to already be members of a number of loyalty programs).

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• (No detriment to Qantas) To the extent that the terms of participation in the QFF Program and QBR Program (e.g., in relation to funding contributions to Qantas for points earned at BP-branded sites) may effectively be aligned between BP and participating BP Resellers, no harm will result to Qantas-to that extent, the proposed conduct simply facilitates aspects of the LPA agreed directly between BP and Qantas.

• (Various competing loyalty programs) The proposed conduct will not lead to any discernible detriment in the form of reduced competition between loyalty programs. Various loyalty programs that currently compete with the BP Rewards Program, QFF Program and QBR Program have similarly large memberships comprising millions of consumers. For example, as outlined in section 8.1, it is estimated that: the Woolworths Rewards program has approximately 11 million members; the flybuys program has approximately 8 million; Velocity has approximately 9.1 million; and MYER one has approximately 5 million. Further, as outlined in section 9.2, there are a number of loyalty programs that allow the earning and redemption of points through purchases made from fuel retailers. While fuel retailers are attractive loyalty program partners, BP is only one of many fuel retailers, and wide range other attractive partners will remain available to existing or new third-party loyalty programs.

• (Low impact of exclusivity) As noted in section 9.2 above, each of the other major loyalty programs in operation has some form of fuel partnership in place. As a result, any exclusivity negotiated between BP and participating BP Resellers will have a limited impact on existing loyalty program operators. In particular, the exclusivity aspects of the proposed conduct partly serve to ensure that participating BP Resellers are committed to the promotion of the BP Rewards Program once they have agreed to participate, and to avoid any consumer confusion that may arise from BP-branded sites offering benefits in relation to a variety of loyalty programs.

• (Low impact of boycotts) To the extent that the proposed conduct technically constitutes boycott conduct (e.g., as a result of limiting participation in other loyalty programs, or restricting the supply of data), as noted above, it partly serves to avoid the consumer confusion that may arise from BP-branded sites offering benefits in relation to various loyalty programs. BP and participating BP Resellers have not, and will not, engage in any boycott for the purposes of negotiating with Qantas or any other potential BP Rewards Program partner.

12.3 Retail fuel and convenience markets To the extent that the proposed conduct involves co-ordination between BP and participating BP Resellers in relation to transactions in retail fuel markets, no public detriments will result for the following reasons.

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• (Low proportion of retail fuel sites involved) BP and BP Reseller sites account for only approximately 19% of retail fuel sites in Australia. Further, some of those sites will not participate in the BP Rewards Program or QFF Program.

• (Limited and pro-competitive co-ordination between BP and BP Resellers) The co-ordination of benefits will be limited to agreements regarding the benefits to be delivered to consumers under the BP Rewards, QFF Program and QBR Program. No broader co-ordination of retail fuel or convenience store item prices is contemplated. For example, while BP and participating BP Resellers may agree that a cpl discount will be applied to the purchase of fuel upon the redemption of points, there will be no agreement about the pre­ discount price of that fuel.

• (Voluntary participation for consumers and businesses) Membership of the BP Rewards, QFF Program and QBR Program will be entirely voluntary for consumers and businesses. BP and participating BP Resellers will continue to service a mix of loyalty program members and non-members. Further, there is no obligation on any program members to acquire fuel, convenience store items or any other good or service from BP or participating BP Resellers, or to redeem any program points at BP-branded sites.

• (Effectively voluntary participation for BP Resellers) A decision of an existing BP Reseller to agree to participate in the BP Rewards Program, QFF Program and QBR Program, whether under a new or a re-negotiated POSA or other agreement, is effectively voluntary in that each BP Reseller retains the option of concluding wholesale supply arrangements with a competitor of BP. In any event, BP expects that a significant number of BP Resellers will voluntarily participate in these programs, and submits that the likely public benefits of any future mandatory participation by BP Resellers are likely to outweigh any associated public detriment (e.g., the costs associated with participation in the programs is likely to be lower per site the higher the level of BP Reseller participation is).

• (Limited impact on competitors) While the proposed conduct will deliver genuine benefits to consumers, they will not be so significant as to threaten the viability of competing fuel and convenience retailers (including non-participating BP Resellers).

• (No limitation on further consumer benefits) Implementation of the BP Rewards, QFF Program and QBR Program at BP-branded sites does not prevent other competing fuel retailers from offering similar discounts or providing other forms of benefits to consumers - in fact, the implementation of these programs at participating BP-branded sites will encourage such behaviour by competing fuel retailers.

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13 Contact details of relevant market participants Contact details for BP Resellers and Velocity are set out in Confidential Annexure 5.

14 Conclusion For the reasons outlined above, BP submits that the extensive public benefits of the proposed conduct will significantly outweigh any public detriment.

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Declaration by applicant(s)

The undersigned declare(s) that, to the best of their knowledge and belief, the information given in response to questions in this form is true, correct and complete that complete copies of documents required by this form have been supplied, that all estimates are identified as such and are their best estimates of the underlying facts, and that all the opinions expressed are sincere.

The undersigned undertake(s) to advise the ACCC immediately of any material change in circumstances relating to the application.

The undersigned are aware that giving false or misleading information is a serious offence and are aware of the provisions of sections 137.1 and 149.1 of the Criminal Code (Cth).

[SIGNATURE PROVIDED]

Signature of authorised person(s)

Solicitor on behalf of BP Australia Pty Ltd (Office held)

Alistair Newton (Name of authorised person)

This 4th day of September 2019.

Note: If the Applicant is a corporation, state the position occupied in the corporation by the person signing. If signed by a solicitor on behalf of the Applicant, this fact must be stated.

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Annexures

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