Woolworths and Coles have hit back at the ACCC case over fake discounts

Coles and Woolies have defended accusations of fake discounts by saying almost all were price hike requests from food and grocery suppliers hit by a ‘sudden outbreak of inflation’.

Supermarket giants Woolworths and Coles have strongly denied accusations of fake discounts by saying almost all followed price-hike requests from food and grocery suppliers to make later discounts indeed genuine.

The Australian Competition & Consumer Commission has accused the retailers of misleading consumers.

It was crucial to acknowledge the price hike requests, the supermarkets argued in the Federal Court on Wednesday, as high inflation had put pressure on suppliers who sought to recover their costs. This meant the discounts later offered by Woolworths and Coles were not “illusory” as claimed by the regulator.

It seems the key thrust of the supermarket giants’ defence will be that the initial price hikes pushed through by both retailers provide the base on which later promotions needed to be assessed.

Woolworths has pushed back strongly against accusations of using ‘fake’ discounts by the ACCC. Picture: AAP

On launching the case last month, ACCC chair Gina Cass-Gottlieb said the Coles and Woolworths discounts “were, in fact, illusory”.

Counsel for Woolworths, Cameron Moore SC, told Justice Michael O’Bryan on Wednesday the ACCC case was “misconceived” and the price discounts offered to shoppers were “factual”. He was matched by counsel for Coles, John Sheahan KC, who told the Federal Court that in “almost every case” the raised prices on more than 250 items tracked by the ACCC came about because of price hike requests from food and grocery suppliers who faced an increase in costs during a “sudden outbreak of high inflation”.

“The ultimate discounted price, whether that was a genuine discount, has to be considered or assessed in light of the reality of the … (original) price … being the product of real cost increases imposed on a supplier which the supplier need to recoup,” Mr Sheahan told the court.

Mr Sheahan KC said in order to discover the genuineness of the discounted price on a grocery item later offered by Coles, it was important to look at how the cost of the product to Coles “came about”.

“Because the implication, what we think is implicit in words like “illusory” or “genuine”, is that there was some artificiality in the (original) price. And we say no,” he said.

However, counsel for the ACCC, Sarida McLeod, brushed aside the arguments.

“I very much appreciate Mr Moore and Mr Sheahan outlining Coles and Woolworths respective positions – none of that takes the ACCC by surprise. And its position is, be that as it may, the conduct is still misleading,” Ms McLeod said.

Lawyers for Woolworths and Coles have told the Federal Court their discounts were genuine and have pushed back against the ACCC’s case.

Last month, the ACCC accused Woolworths and Coles of raising prices on hundreds of everyday basket items, then slightly reducing prices and saying they were on discount, when in fact the “discounted price” was higher than the average sale price in the year leading up to the promotion. The ACCC alleges Woolworths and Coles thus were luring shoppers with fake or illusory discounts.

Both Woolworths and Coles have been tight-lipped about the accusations since the ACCC launched its case last month, but as lawyers appeared before Justice O’Bryan for a directions hearing on Wednesday the public has been provided with the initial outlines of their defences.

Mr Sheahan said Coles did not see this as a case that could be addressed by only referencing a narrow set of facts with impacts for suppliers and customers.

Mr Sheahan said the evidence would show that when price requests came in from suppliers they were investigated by Coles to test whether they were well grounded.

Mr Moore said: “The suggestion which seems to light the heart of the ACCC’s case is that Woolworths initiated temporary price rises or price spikes – and that is not correct factually.”

He said any price hikes were requested by suppliers.

Later price discounts by Woolworths were indeed a reduced or dropped price, “and legitimately so”.

While Woolworths and Coles face similar accusations, the twin cases could ultimately be separated as new facts emerge.

Counsel for the ACCC, Ms McLeod, said many of the facts – such as the ticket prices offered by Woolworths and Coles on the shelf – would not be in dispute but as facts emerged the cases could need to be separated.

This week the Federal Court released new court material linked to the case, with ACCC documents lodged for the case revealing the full details of more than 250 items for which Woolworths and Coles allegedly pushed through artificial price hikes, to later offer slimmer discounts as part of the alleged ‘‘fake discount” conspiracy. The ACCC document showed alleged fake discounts of up to 39 per cent and covered hundreds of everyday grocery items from pet food and fly spray to infant milk formula and chocolate biscuits.

The case is continuing.

Originally published as Woolworths and Coles have hit back at the ACCC case over fake discounts