Top ten advertisers Woolworths and Coles are in court accused of misleading consumers through discount pricing advertising on hundreds of supermarket products.
The charges by competition watchdog the ACCC in the Federal Court relate to marketing campaigns Prices Dropped and Down Down claiming sustained reduction in regular prices of supermarket products.
"However, in the case of these products, we allege the new ‘Prices Dropped’ and ‘Down Down’ promotional prices were actually higher than, or the same as, the previous regular price,” ACCC chair Gina Cass-Gottlieb said.
Coles intends to defend the proceedings.
In a statement Coles said: "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."
In response, Woolworths Group CEO Amanda Bardwell said: "Our Prices Dropped program was introduced to provide our customers with great everyday value of their favourite products."
The ACCC was directed by treasurer Jim Chalmers in January 2024 to examine pricing practices and the relationship between wholesale, farmgate and retail prices.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.
The products sold by Woolworths and Coles relate to regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year.
The products were then subject to price rises of at least 15% 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.
“Following many years of marketing campaigns by Woolworths and Coles, Australian consumers have come to understand that the ‘Prices Dropped’ and ‘Down Down’ promotions relate to a sustained reduction in the regular prices of supermarket products," Cass-Gottlieb said.
“We allege that each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory.
“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."
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.
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.
“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures. It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims,” Ms Cass-Gottlieb said.
“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 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.
Example at Woolworths
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 at Coles
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.
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