The ACCC has commenced separate proceedings in the Federal Court against Coles and Woolworths for allegedly misleading consumers through discount pricing claims on hundreds of common supermarket products.
The allegations relate to products sold by the retailers at regular long-term prices which remained the same, excluding short-term specials, for at least six months. The products were then subject to price rises of at least 15 per cent for brief periods, before being placed in Woolworths’ ‘Prices Dropped’ promotion and Coles’ ‘Down Down’ promotion, at prices lower than during the price spike but higher than, or the same as, the regular price that applied before the price spike.
In doing so, says ACCC Chair Gina Cass-Gottlieb, Coles and Woolworths each breached the Australian Consumer Law, by making misleading claims about discounts, when the discounts were, in fact, illusory.
“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost-of-living pressures,” Ms Cass-Gottlieb said.
“It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”
The maximum penalty for each breach of the Australian Consumer Law increased on 10 November 2022, part way through the period of the alleged conduct. For contraventions from 10 November 2022, the maximum penalty is the greater of:
- $50,000,000
- if the Court can determine the value of the ‘reasonably attributable’ benefit obtained, three times that value, 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.
Alleged conduct
The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months. The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually with a ‘was’ price displayed showing what the price was during the short-term price spike and the date of that price.
Products implicated in the conduct include popular brands such as Arnott’s, Doritos, Palmolive, Uncle Toby’s, Bega, Cadbury, Maggi and Sunrice.
ACCC give the example of Oreo Family Pack Original 370g, sold by Woolworths at a regular price of $3.50 from at least 1 January 2021 until 27 November 2022. On 28 November 2022, the price was increased to $5 for a period of 22 days before being placed on a ‘Prices Dropped’ promotion with the tickets showing a ‘Prices Dropped’ price of $4.50 and a ‘was’ price of $5. The ‘Prices Dropped’ price of $4.50 was in fact 29 per cent higher than the product’s previous regular price of $3.50.
Similarly at Coles, Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale at a regular price of $5.50 from at least 1 January 2021 until 11 October 2022. On 12 October 2022, the price was then increased to $7 for a period of 28 days before being placed on a ‘Down Down’ promotion with the tickets showing a ‘Down Down’ price of $6 and a ‘was’ price of $7. The ‘Down Down’ price of $6 was in fact 9 per cent higher than the product’s previous regular price of $5.50.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.
“We also allege that in many cases both Woolworths and Coles had already planned to later place the products on a ‘Prices Dropped’ or ‘Down Down’ promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher ‘was’ price,” Ms Cass-Gottlieb said.
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 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.
Retailers respond
Both Coles and Woolworths have acknowledged the legal proceedings and are reviewing the claims.
Woolworths Group CEO Amanda Bardwell says cost-of-living pressures remain a key issue for millions of Australians who shop with the retailer every week.
“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,” she said.
“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 told shareholders the allegations relate to “a period of significant cost inflation” when Coles was receiving a large number of cost price increases from its suppliers and, in addition, Coles’ own costs were rising, which led to an increase in the retail price of many products.
“Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price,” the retailer said.
“The Down Down program is one type of promotional campaign involving a longer-term reduction in the retail price of a product, and has been important in delivering lower prices to our customers and driving volume for our suppliers for many years.”
Customers deserve better
Prime Minister Anthony Albanese commented on the allegations when announcing the release of the exposure draft of the mandatory food and grocery code this week.
“These are serious allegations that the ACCC is bringing before the courts,” he said. “If this is found to be true, it’s completely unacceptable. This is not the Australian spirit. Customers don’t deserve to be treated as fools by the supermarkets. They deserve much, much better than that.
“Shoppers are on the hunt for discounts when they do their weekly grocery shop because every dollar matters when people get to the checkout, advertised discounts need to be genuine each and every time. Specials need to be real because household budgets are tight. And I welcome the ACCC standing with supermarket shoppers,” Mr Albanese said.
Consumer watchdog CHOICE has also welcomed the news that the majors will face court over their alleged misleading discount practices.
“We know from our extensive work in this area that promotional labels at the major supermarkets often confuse shoppers, and the frequent changes in prices make it difficult to tell whether there is a genuine discount or not,” said Rosie Thomas, Director of Campaigns at CHOICE.
“Earlier this year, our nationally representative research revealed that on average 1 in 4 people found it difficult to identify if certain supermarket labels represented a true discount or not. ‘Down Down’ labels at Coles and ‘Prices Dropped’ labels at Woolworths were among those that caused confusion for consumers.
“This kind of bad behaviour from the supermarkets is exactly why we gave Coles and Woolworths a Shonky in 2023, and it urgently needs to be addressed – particularly during a cost-of-living crisis when people are doing it tough,” Ms Thomas said.
Finance and economic experts have said the allegations highlight the need for transparency to regain trust in the industry.
“Trust is fundamental in the relationship between consumers and retailers,” said Dr Meg Elkins is Senior Lecturer in Economics, specialising in community wellbeing and dynamic pricing at RMIT.
“It’s crucial that we take immediate action to protect Australian families and ensure they can access affordable groceries without fear of being misled.”