The Australian Competition and Consumer Commission (ACCC) has launched legal action against Woolworths and Coles, alleging the supermarket giants breached consumer law by misleading consumers through discount pricing claims on hundreds of products.
The ACCC alleges both companies sold items at regular prices for up to six months, then increased the prices of those items by at least 15 per cent before placing them in the “Prices Dropped” Woolworths promotion or “Down Down” Coles promotion.
Misleading Discounts
The ACCC has alleged that Woolworths and Coles were using misleading tactics with their “Prices Dropped” and “Down Down” promotions. They are claiming that the promotions were not actually a sustained reduction in the regular prices of supermarket products, but rather a temporary price hike followed by a return to a price that was often higher than or the same as the previous regular price.
The ACCC has alleged that these pricing tactics were implemented on hundreds of popular supermarket products, including household staples such as Tim Tams, Dolmio sauces, Doritos salsa, Energizer batteries, Kellogg’s cereals and hundreds of others.
How the ACCC Allegedly Uncovered the Scheme
The ACCC identified this conduct through consumer contacts to the ACCC and social media monitoring, and then conducted an in-depth investigation using its compulsory powers.
The ACCC’s Arguments
The ACCC alleges that the supermarkets offered certain products at a regular price for at least 180 days. They then increased the price of the product by at least 15 per cent for a relatively short period of time, and subsequently placed it onto their ‘Prices Dropped’ or ‘Down Down’ program.
The ACCC alleges the display of the Prices Dropped and Down Down tickets was misleading, as the price of the products was in fact higher than or the same as the regular price at which the supermarket had previously offered the products for sale.
The ACCC alleges that Woolworths made false or misleading representations to consumers about the prices of 266 products during the period between September 2021 and May 2023. Coles is accused of making misleading representations about the prices of 245 products during the period between February 2022 and May 2023.
Specific Examples of the Alleged Misleading Pricing
Example - Oreo Family Pack Original 370g
From at least 1 January 2021 until 27 November 2022, Woolworths offered the Oreo Family Pack Original 370g product for sale at a regular price of $3.50 on a pre-existing ‘Prices Dropped’ promotion for at least 696 days.
On 28 November 2022, the price was increased to $5.00 for a period of 22 days. On 20 December 2022, the product was placed on a ‘Prices Dropped’ promotion with the tickets showing a ‘Prices Dropped’ price of $4.50 and a ‘was’ price of $5.00. The ‘Prices Dropped’ price of $4.50 was in fact 29 per cent higher than the product’s previous regular price of $3.50.
In this example, the ACCC alleges Woolworths had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’. Woolworths had decided (after a request from the supplier for a price increase) on or around 18 November 2022 to take the product off ‘Prices Dropped’, increase the price, and then put the product back on to ‘Prices Dropped’ three weeks later.
Example Strepsils Throat Lozenges Honey & Lemon 16 pack
From at least 1 January 2021 until 11 October 2022, Coles offered the Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale at a regular price of $5.50 (on a pre-existing ‘Down Down’ promotion) for at least 649 days, including one seven-day short-term special.
On 12 October 2022, the price was then increased to $7.00 for a period of 28 days. On 9 November 2022, the product was placed on a ‘Down Down’ promotion with the tickets showing a ‘Down Down’ price of $6.00 and a ‘was’ price of $7.00. The ‘Down Down’ price of $6.00 was in fact 9 per cent higher than the product’s previous regular price of $5.50.
In this example, the ACCC alleges Coles had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’. Coles had decided (after a request from the supplier for a price increase) on or around 7 October 2022 to take the product off ‘Down Down’, increase the price, and then put the product back on to ‘Down Down’ four weeks later.
The ACCC’s Action and Response from the Supermarkets
The ACCC is seeking declarations, penalties, costs and other orders. The ACCC is also seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.
Woolworths Group said it would carefully review the claims and engage with the ACCC on the matter.
“Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week,” CEO Amanda Bardwell said.
“Our customers are telling us they want us to work even harder to deliver meaningful value to them and it's important they can trust the value they see when shopping our stores.
“Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products.
“We remain committed to offering many ways for customers to save at the checkout, including thousands of weekly specials, everyday low prices on household essentials, a great value own brand range and through our Everyday Rewards program.”
Coles said it would defend the proceedings brought against it.
In a statement, the company said the allegations related to a period of significant cost inflation when Coles was receiving a large number of cost price increases from suppliers.
“Coles’ own costs were rising, which led to an increase in the retail price of many products,” it said.
“Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers though the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional prices.”
The Potential Impact on Consumers
The ACCC is concerned that misleading discount claims diminish the ability of consumers to make informed choices about what products to buy and where. In a time of rising costs, consumers need to be able to trust the prices and discounts they see in supermarkets to make informed financial decisions.
The ACCC is seeking a significant penalty to deter the supermarkets and other companies from engaging in misleading pricing practices in the future. The maximum penalty for each breach of the Australian Consumer Law increased on November 10, 2022, and for contraventions from November 10, 2022, the maximum penalty is the greater of:
- $10 million; or
- if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30 per cent of the corporation's adjusted turnover during the breach turnover period for the contravention.
Any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings. The ACCC will not comment on what penalties the Court may impose.
This case has the potential to have a significant impact on the Australian supermarket industry and could lead to greater transparency and regulation in the future. It is important for consumers to be aware of the potential for misleading pricing practices and to make informed choices about where they shop and what products they buy.
What’s Next
This case will now be heard in the Federal Court. The outcome of the case will determine whether Woolworths and Coles were indeed engaging in misleading pricing practices and what penalties, if any, they will face. The case is likely to be closely watched by consumers and the supermarket industry alike.
What Can You Do?
Be aware of potential misleading pricing practices. Look closely at the pricing information and consider whether the discounts are genuine.
Report any suspected breaches of consumer law to the ACCC.
The Broader Picture
This case is just one example of the ACCC’s efforts to ensure that consumers are protected from misleading or deceptive conduct. The ACCC also undertakes a range of other initiatives to promote competition and consumer protection in the Australian economy.
This legal action comes at a time when there is increasing scrutiny of the Australian supermarket sector and its pricing practices. It is likely to fuel further debate about the role of supermarkets in the Australian economy and the need for greater transparency in pricing and promotional activities.
The Future of Supermarket Pricing
This case raises important questions about the future of supermarket pricing in Australia. How can consumers be assured that the prices they see are fair and accurate? What role should the ACCC play in regulating supermarket pricing practices?
Only time will tell how this case will impact the Australian supermarket sector and the way consumers shop in the future. The case will be closely watched by consumers, the supermarket industry, and policymakers alike.
