Shell Malaysia has been instructed by the government to cancel its recently-launched promotion which gives away RM60,000 each week. The promotion goes against government guidelines concerning products which are subsidized, in this case RON95 petrol and also diesel.

The promotion began last Thursday and it is not known how Shell Malaysia will handle entries by customers in the past few days as its statement this evening only says ‘for customers who had participated, a separate communication will be issued at a later date’.

Though there is no specific regulation forbidding petrol companies from having promotions to draw more customers, there has been an understanding that there should not be promotions or incentives given for the purchase of fuels as they are subsidized products. This is not something new and as far back as the mid-1980s, the first controversy started when Shell Malaysia offered a house as the top prize in a fuel-related promotion. Until then, all the other petrol companies had been abiding by the guideline but as a result, the other companies also quickly responded by running promotions of their own and the ministry had to step in and put a stop, reminding all parties not to do such promotions.

The government does not want companies to have promotions or sales incentives for subsidized fuels, eg Shell FuelSave 95

It is not known why, in recent years, fuel-related promotions have been running again and why the ministry did not take action to stop them. However, it is evident now that the authorities are acting and according to an industry source, a memo was sent to all oil companies last month to remind them that they cannot have any promotions that give instant rewards (mineral water, soap, tissue paper, etc) or even contests which relate to subsidized fuels.

The reason is understandable – encouraging people to buy more subsidized fuel will also mean more money spent on subsidies when motorists should instead be trying to reduce fuel consumption. As mentioned earlier, there is no regulation but the industry source suggested that failure to follow such ‘administrative guidance’ would not be in the interests of the company’s business.

Loyalty programs (with points given for purchases) are also a gray area and though Shell’s participation in the Bonuslink program does give its customers points for their fuel purchases which can be redeemed for products or services, a senior executive at Shell Malaysia asserted some years ago that it does not contravene the guidelines.

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