six questions on selling at a loss by distributors, which the government wants to authorize

1What does selling “at a loss” mean?

With this authorization, distributors will have the right to sell fuel at a lower price than that at which they purchased it. This is an upheaval because reselling at a loss has been prohibited in France since 1963. Traders cannot “resell or announce the resale of a product as is below its actual purchase price”explains the General Directorate for Competition, Consumer Affairs and Fraud Control (DGCCRF).

Selling at a loss is usually permitted with a handful of exceptions. The repression of fraud mentions the cessation or change of commercial activity, the end of seasons (during winter or summer sales), in the event of“technical obsolescence or [pour des] out-of-date products“, or if perishable products are “threatened with rapid deterioration”.

2How much price drop should we expect at the pump?

“We are almost talking about potentially half a euro less per liter”said government spokesperson Olivier Véran on RTL on Sunday. “We are not saying that gasoline will drop to 1.40 euros in all stations for six months”he tempered.

If the sale at a loss corresponds to a reduction of 25% compared to the purchase price, “this can save up to 47 cents on a liter of gasoline”estimated on franceinfo Pieyre-Alexandre Anglade, president (Renaissance) of the European Affairs Committee at the National Assembly, praising “a considerable gesture”.

3Will distributors follow the incentive?

François Geerolf, economist at the French Observatory of Economic Conditions (OFCE), expects that supermarkets which have petrol pumps will step into the breach. For them, “this will be a very important commercial argument”he anticipates. “The bet [pour une enseigne de supermarchés ou d’hypermarchés], is that people come for gasoline. The group will lose money on fuel. On the other hand, these customers will stay to do their shopping.”he describes.

In commerce, we speak of a “leader product”, that is to say a flagship product displayed at a particularly attractive price to attract consumers to its sales area with the aim of selling other products in the stride.

4Can this sale at a loss be offset by the increase in prices of other products?

“It’s entirely possible. There’s nothing stopping you from doing it.”judge François Geerolf. “We think there will be no risk of a catch-up effect”declared for his part Olivier Véran, who is banking on “goodwill displayed by those who sell gasoline to make additional efforts”. MP Pieyre-Alexandre Anglade also wants to be reassuring. He affirms that the government will ensure “that there are no compensations or that this does not have repercussions on other products of everyday life”.

5Are independent distributors under threat?

Selling at a loss is “a Practic considered potentially dangerous”François Geerolf explains to franceinfo. “Generally speaking, only large groups have the financial capacity to afford losses for several months”, he elaborates. The smallest players cannot always do this, and “this creates a form of unfair competition”.

The national president of the “Fuel distributors” branch of the Mobilians union, Francis Pousse, did not hide his concern on Sunday on franceinfo. Indeed, of the 6,000 service stations in France (excluding supermarkets) represented by this employers’ organization, 3,400 stations of the TotalEnergies group are already carrying out price capping operations with a price freeze at 1.99 euros per liter. “I announce to you that the [2 600] remaining will not be able to sell at a loss (…) We have stations which make up to 50% or 60% of their gross margin with fuel”, specifies Francis Pousse. He is also worried about competition with large supermarkets who will be able to lower their prices. That “destabilizes the market even more to the disadvantage of those I represent. So, I am very, very, very worried about the future of my stations”he confides.

This fear is shared by Frédéric Plan, general delegate of the French Federation of Fuels, Fuels and Heating. For him, independent service stations risk finding themselves in an untenable situation. “Either they sell at a loss and the bank will no longer lend them money for cash flow, the supplier of petroleum products will no longer sell them products because these are companies that will [être] in situation of going bankrupthe explains. Either they can’t do it, and they won’t sell gasoline [car elles ne seront pas compétitives] or very little, for repairs.”

6Why isn’t the state lowering fuel taxes?

“The government faces a budgetary equation that is not simple. The country’s public deficit is at a historic level”, recalls François Geerolf. The Court of Auditors also asked “a substantial effort” on spending in order to reduce the deficit by 2027. However, a return to the pump would risk damaging France’s finances. Thus, a discount of 20 cents on fuel prices for one year costs 12 billion euros, said Bruno Le Maire, the Minister of the Economy, on franceinfo, on September 7. “The responsibility of the State is also to reduce its deficit and its debt”argued Elisabeth Borne.

Beyond budgetary considerations, the government is putting forward a principle of fairness not to renew this measure “which is not fair”argued Olivier Véran.

“People who earn 1,500 euros per month like those who earn 6,000 euros had the same rebate. It’s not very egalitarian.”

Olivier Véran, government spokesperson

on RTL, Sunday

Diplomatic and geopolitical reasons are also put forward by the executive. A reduction in the price of gasoline decided by the State “means that you are paying for the oil diplomacy of Mr. Putin and Saudi Arabia which aims to reduce volumes to increase prices”estimated Bruno Le Maire. “We are not intended to pay for political and geopolitical choices” of these countries.

>> Why a new rebate on the price of fuel is not planned