Australia’s two biggest supermarket chains are set to face court over allegations they misled customers with fake discounts.
The Australian Competition and Consumer Commission on Monday launched legal action in the Federal Court against Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd.
The consumer watchdog says both retailers raised prices on products by 15 per cent for short periods before placing them in Woolworths’ Prices Dropped promotion and Coles’ Down Down promotion at prices that were actually at or above their regular price.
Both are accused of doing this with hundreds of different product lines.
ACCC chair Gina Cass-Gottlieb said the duopoly breached consumer law by making “misleading claims about discounts when these were, in fact, illusory”.
“It is vital that Australian consumers can trust the accuracy of prices and discounts,” Cass-Gottlieb said.
‘We claim that these misleading claims about illusory discounts diminished consumers’ ability to make informed decisions about what products to purchase and where.’
The allegations relate to 266 Woolworths products sold at different times over 20 months and 245 Coles products sold at different times over 15 months.
The depictions were made on price tags displayed to consumers in stores and online, usually with a “previous” price showing what the price was during the short-term price increase.
Australia’s two biggest supermarket chains are to face court after allegedly misleading shoppers with fake discounts on products with short-term price increases (file image)
In a statement, the ACCC estimates that Woolworths and Coles earned “significant” revenues from the sale of “tens of millions” of the products allegedly affected.
The watchdog presented examples of giant supermarkets allegedly raising prices to establish a new “previous” price in order to promote alleged misleading reductions.
They allege Woolworths set the price of a family pack of Oreos at $3.50 for at least 696 days before raising it to $5 on November 22, 2022.
That increased price was only in place for 22 days before the promotion reverted to $4.50 with the “previous” price being $5.00, so Woolworths is effectively being accused of increasing the price of biscuits while advertising them as if they were on sale.
‘Woolworths had decided (following a supplier request for a price increase) on or about 18 November 2022 to remove the product from the ‘Reduced Prices’ list, increase the price and then put the product back on ‘Reduced Prices’ three weeks later,’ the statement said.
The ACCC alleged Coles carried out a similar scheme with Strepsils throat lozenges that cost buyers $5.50 over at least 649 days.
“On October 12, 2022, the price was increased to $7.00 for a period of 28 days,” the statement reads.
‘The false or misleading statements related to the price of basic household products at a time of increasing pressures on the cost of living, and were made in the context of a program that Woolworths specifically promoted as designed to help consumers make long-term savings on the cost of their food.
‘By its conduct, Woolworths diminished the ability of consumers to make informed decisions about their essential purchases.’
‘On November 9, 2022, the product was placed in a ‘Down Down’ promotion with tickets displaying a ‘Down Down’ price of $6.00 and a ‘Previous’ price of $7.00.
The consumer watchdog said supermarkets used the briefly increased cost as the new “old” price when they put them back on sale.
‘The ‘Down Down’ price of $6.00 was actually 9 percent higher than the product’s previous regular price of $5.50.
‘As a result of Coles’ conduct, consumers shopping both in-store and online may have made product purchasing decisions based on false or misleading information.’
The watchdog is seeking penalties, costs and community service orders for supermarkets to fund registered charities to deliver meals to vulnerable Australians.
Some of the allegations occurred after 10 November 2022, when the maximum penalty for breaching Australian Consumer Law was increased.
Any infringement committed after that date could cost the supermarket giants three times the value of the “reasonably attributable” profit made, 30 per cent of turnover during the infringement period or $50 million, whichever is higher.
In a statement to the ASX on Monday, Woolworths Group said it would “carefully review the allegations made by the ACCC and continue to 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,” said Woolworths Group chief executive Amanda Bardwell.
The watchdog is seeking penalties, costs and community service orders for supermarkets to fund registered charities to deliver meals to vulnerable Australians.
‘Our customers tell us they want us to work even harder to deliver meaningful value to them and it’s important that they can trust the value they see when they shop in our stores.
‘We remain committed to offering customers many ways to save at checkout.’
Coles said it was “very conscious of cost of living pressures” and intended to defend the allegations in a statement to the stock exchange.
The statement said the price increase was due to the supermarket covering its own cost increases due to “significant” inflation.
“Coles has sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and delivering value to customers by resuming promotional activity as soon as possible after the new non-promotional price is established,” the statement said.
‘In line with our values, Coles takes compliance with Australian Consumer Law very seriously and places great emphasis on building trust with all stakeholders, especially our customers.’