ACCC takes Woolworths, Coles to court over misleading price drop claims

The competition regulator has launched separate legal proceedings against the two retail giants, alleging ‘misleading’ discounts on hundreds of common supermarket products.

Coles boss Leah Weckert. Picture: Martin Keep

Coles and Woolworths are facing claims they promoted “misleading” discounts on hundreds of common supermarket products in a blockbuster court case launched by the competition regulator.

The Australian Competition & Consumer Commission’s separate proceedings in the Federal Court allege a breach of the Australian Consumer Law by “misleading consumers through discount pricing claims” on the products.

The allegations relate to products sold by Woolworths and Coles at 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 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 which applied before the price spike.

Coles shares slid on the news, to be down 3.4 per cent at $18.57 in early afternoon, while Woolworths was down 2.8 per cent at $33.99.

The country’s two biggest supermarkets have come under significant scrutiny this year as sticky inflation has driven up the cost of living, which is set to be a key election issue ahead of the 2025 federal poll.

Major political parties have been tussling to position themselves as champions for consumers, including the Greens — who led a Senate inquiry into the major supermarkets which published a scathing report about pricing and promotion practices of the retail giants earlier this year.

Former Woolworths chief executive Brad Banducci resigned in February after a combative media interview about the issue.

The inquiry’s report highlighted that Coles and Woolworths are legally prohibited from displaying the wrong prices on their products.

“Under laws and regulations enforced by the Australian Competition and Consumer Commission, businesses cannot display incorrect pricing or pricing that could create a false impression,” the inquiry’s scathing report said.

Consumer advocate association CHOICE recommended the government “introduce a mandatory information standard for supermarkets that ensures their pricing is clear”, according to the report.

“CHOICE recommended that … supermarkets should publish historical pricing data on all products in stock so that consumers are able to compare and verify pricing claims,” the report said.

“Empowering consumers with this information will mean they are able to make stronger purchasing decisions and not be lured into misleading specials and discounts.”

ACCC chair Gina Cass-Gottlieb said the Coles and Woolworths 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,” she said on Monday.

The alleged conduct covered 266 Woolworths products at different times across 20 months and about 245 Coles products at different times over 15 months.

The ACCC’s investigation, using its compulsory powers, followed consumer contacts to the ACCC and social media monitoring. It estimates the duopoly “sold tens of millions of the affected products and derived significant revenue from those sales”.

Coca-Cola is one of the items which the ACCC claims was misleadingly discounted. Picture Joel Saget/AFP

The regulator is seeking declarations, penalties, costs and other orders including requiring both supermarket businesses to fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

For contraventions from November 10, the maximum available penalty is $50m, or 30 per cent of the corporation’s adjusted turnover during the period of alleged breaches.

Responding to the ACCC’s court case, Coles told shareholders on the ASX in a statement it intended to defend the proceedings.

“The allegations relate to a period of significant cost inflation when Coles was receiving a large number of cost price increases from our suppliers and, in addition, Coles’ own costs were rising, which led to an increase in the retail price of many products,” the statement said.

“Coles is acutely aware of the cost-of-living pressures affecting households and continually seeks to deliver value to our customers.

“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.”

Woolworths CEO Amanda Bardwell told the market it would review the ACCC’s case.

“Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products,” she said.

It has been alleged Woolworths applied the ‘fake’ promotion to 266 products across 20 months between September 2021 and May 2023, while the ACCC claimed Coles falsely discounted 245 products across 15 months between February 2022 and May 2023.

A range of products were included in the promotions, the ACCC alleged, including Arnott’s Tim Tams biscuits, Dolmio sauces, Doritos salsa and Energizer batteries among others from Woolworths.

The ACCC has alleged Woolworths misled consumers by advertising discounted Oreos.

In a specific example, the ACCC alleged Woolworths offered the Oreo Family Pack 370g product for sale at a regular price of $3.50 for at least 696 days between January 2021 and November 2022.

But in November 2022, the price increased to $5 for about three weeks before it was reduced to $4.50 under a “prices dropped” promotion from December 2022.

“The prices dropped price of $4.50 was in fact 29 per cent higher than the product’s previous regular price of $3.50,” the ACCC said in a statement.

“In this example, the ACCC alleges Woolworths had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’.”

From Coles, the ACCC claimed Band-Aids, Bega cheese, Cadbury chocolates and Coca-Cola soft drink, among other items, were “discounted”.

In one example, Coles offered Strepsils Throat Lozenges Honey & Lemon 16 pack for sale at a regular price of $5.50 between January 2021 and October 2022.

But, on October 21 2022, the price increased to $7 for about a month before it was placed on a “down down” promotion for $6. The “down down” price was in fact 9 per cent higher than the regular price.

“In this example, the ACCC alleges Coles had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’,” the ACCC said in a statement.

The regulator is not alleging any collusion or anti-competitive behaviour by the supermarkets, or any legal contraventions by their suppliers.

Originally published as ACCC takes Woolworths, Coles to court over misleading price drop claims