Virgin's Velocity’s BP points partnership still up in the air

The fate of the 'earn points at the pump' partnership between Virgin Australia's Velocity loyalty scheme and petrol giant BP remains unresolved, with BP considering a legal challenge against the ACCC's decision to reject the company's $1.8 billion deal to purchase Woolworths' chain of petrol stations.

Velocity Frequent Flyer and BP launched their partnership in April 2015 an in effort to equalise retail points-earning opportunities for Velocity members against Qantas' dominant alliance with Woolworths and Caltex.

However, December 2016 saw BP move to purchase the Woolworths/Caltex chain, bringing over 500 Woolworths-branded fuel outlets under the wing of BP.

The Woolworths-Caltex service stations would be rebranded as BP outlets and absorbed into the larger BP network, with BP becoming "a cornerstone partner in Woolworths' Everyday Rewards loyalty program" according to the petrol retailer, effectively dumping Virgin for Qantas by dint of the Woolworths-Qantas tie-up.

Given the scope of the purchase, this was subject to approval by the Australian Competition and Consumer Commission, which has now decided to oppose the sale of the Woolworths-owned service stations to BP due to concerns this would raise overall petrol prices.

"BP prices at premium levels, whereas Woolworths is a strong price competitor," ACCC chairman Rod Sims said.

"So you find that BP's prices in the major capital cities are anywhere between 1.5 and 3 cents a litre greater than Woolworths.

More important, perhaps, is that BP increases its prices more quickly in the up phase of the fuel price cycle and is slower to discount."

"Fuel is such an important component of people's income and welfare that even a 1 to 2 cent a litre increase does matter," Sims added. "So we think that is substantial and therefore meets the hurdle of a substantial lessening of competition."

For its part, Velocity sued BP in the Supreme Court of Queensland for attempting to wrap-up its points partnership earlier than planned, with BP defending its position, arguing that Velocity had breached its partnership agreement by allowing members to earn Velocity points on petrol purchases at rival Coles Express stations via its Flybuys alliance.

The court ruled in favour of BP, declaring that BP terminated its participation in the Velocity program as of July 1 2017, although the competition watchdog's decision made this a moot point.