France plans below-cost petrol, but smaller retailers aren’t happy

Rising fuel prices will see the French government lift a ban on below-cost sales of fuel. (Getty Images)

• France will allow retailers to sell fuel at a loss.
• Smaller service stations fear they may not be able to compete with larger retailers that can absorb losses.
• The change in legislation could come into effect as early as the beginning of December. 

France will lift a ban on below-cost sales to bring down fuel prices, Finance and Economy Minister Bruno Le Maire said on Monday, hoping to soothe consumers’ inflation anxieties.

With a draft law set for debate in October, “I hope it will come into force from the beginning of December,” Le Maire told broadcaster France 2.

Selling products at a loss has been mostly banned in France since 1963, over fears larger retailers could drive small competitors out of business by offering artificially low prices whose costs they could afford to absorb.

But Paris is extremely sensitive to discontent over rising fuel costs as prices soar – remembering the massive and sometimes violent “Yellow Vests” protests sparked by a planned new fuel tax in 2018-19.

“This never-before-seen measure will give us concrete results for the French public, without subsidising fuel,” Prime Minister Elisabeth Borne told daily Le Parisien at the weekend.

“The state can’t bear the cost of inflation by itself, otherwise that will deepen the deficit,” Le Maire said on Monday.

So far, the government had pushed price limits and called on groups to prolong at-cost sales to try and ease the pain, urging major fuel sellers to show “solidarity” towards drivers.

Oil giant TotalEnergies, which operates one-third of French forecourts, said it would keep prices for petrol and diesel capped at €1.99 (about R40) per litre into next year.

Ministers have often insisted that higher prices are down to global oil market factors, including Saudi and Russian production cuts, the recent devastating floods in Libya and forecasts of still lower supply in the fourth quarter.

With low-cost petrol mainly a way to bring in customers who go on to buy higher-margin items, large retailers have been calling for the right to sell at a loss, meeting opposition from smaller service stations.

France’s Economy and Finances Minister Bruno Le Maire announced the deregulation of fuel to help mitigate riding fuel costs.

Getty Images Photo by Daniel Pier/NurPhoto via Getty Images

“My members get 40 or 50 percent of their income from fuel sales, so if they sell at a loss, I’d give them three months” to survive, said Francis Pousse, president of the Mobilians industry group representing 5 800 independent service stations.

Large groups “can’t keep losing 15-euro cents on every litre of fuel,” Pousse added, saying he was “sceptical” of the measure’s effect on purchasing power. France’s law against selling at a loss got a high-profile outing in 2018, when supermarket giant Intermarche admitted that offers of up to 70% discounts on products including Nutella chocolate spread were not in line with the rules.

The firm was later fined 375 000 euros over the promotions, which triggered scenes of shoving and even fights in several of its shops over pots of the creamy hazelnut treat.

Similar calls were made for the South African government to deregulate the price of fuel, when prices neared record highs in June 2022.

Reggie Sibiya, CEO of the Fuel Retailers’ Association lamented the negative effect this could have on retailers, citing small already small profit margins as the primary issue. 

“The people that are calling for deregulation are ignorant. They think that the margin for retailers is a lot to share. There is nothing to share. Actually, we need more in order to sustain our businesses,” Sibiya said at the time.