Coles, Woolworths and ACCC advance agreed facts in blockbuster sham discounting case

The competition regulator, Coles and Woolworths have agreed on some ground rules heading into the blockbuster trial where the ACCC alleges the supermarket giants used fake or illusory discounts on 500 popular grocery items.

Woolworths CEO Amanda Bardwell (left), ACCC chair Gina Cass-Gottlieb and Coles CEO Leah Weckert.

The blockbuster case between the competition regulator and supermarket giants Woolworths and Coles has taken a crucial legal step forward with all parties agreeing to hard facts around hundreds of grocery items they allegedly duped shoppers into believing were discounted.

The path is now clearer for the Australian Competition & Consumer Commission to present its full case to the Federal Court and its potentially damaging allegations that Woolworths and Coles employed fake or illusory promotions on around 250 popular grocery items.

It means the courts, the ACCC and supermarkets won’t need to get bogged down arguing over the prices, discounts and dates for all 500-odd basket items the regulator had detailed in its claim last year. It also means they can start litigating the matter at the heart of the action: whether the supermarkets acted illegally.

Both Woolworths and Coles have strongly denied allegations they employed fake discounts by raising prices then cutting them to convey a bargain, arguing almost all instances followed price-hike requests from food and grocery suppliers and were indeed genuine.

The ‘statement of agreed facts’ covers 276 promotions from Woolworths on 266 unique grocery items, and for Coles 255 promotions relating to 245 unique products.

Woolworths will be tried on its ‘Prices Dropped Program’ during the period from September 2021 to May 2023. And the Coles action spans its ‘Down Down’ promotion from February 2022 to May 2023.

The ACCC has accused Coles and Woolworths of using fake or illusory discounts to lure in shoppers. Picture: Dan Peled

The new court documents reveal that Woolworths had introduced its ‘Prices Dropped’ program around 2015 as an answer to customer perceptions and concerns around limited or short-dated discounts - also known as “high-low” promotions.

Prices Dropped was developed following “feedback that consumers were seeking a better balance between short term promotions and consistent daily value on shelf”.

The ‘high-low’ promotions (sometimes written as “hi-lo” promotions) involved a product being placed on special for short periods, typically 1-2 weeks, before returning to the ordinary price, the court documents explain. That is different to the newly created ‘Prices Dropped’ promotion that could last 12 months.

“The visual appearance of the ‘Prices Dropped’ tickets was distinct from ‘specials’ and other short-term promotions. This difference was intentional so that consumers could recognise ‘Prices Dropped’ and ‘specials’ as separate and different price reduction mechanics with ‘Prices Dropped’ being a more stable shelf price reduction program, and a ‘special’ being a temporary and short-term promotional discount.”

The ACCC said in its court documents that grocery items included in the campaign were typically supported by supplier funding. If supplier funding ceased, the product could be withdrawn from promotion.

In the case of three instant coffee products — Moccona pods — Woolworths and the ACCC agreed that the Prices Dropped price was higher than the original price.

This is because Woolworths did not receive supplier funding to support the placement of the products on sale.

At the core of the ACCC’s allegations, and repeated in the new court documents, is that as supplier funding for discounts came and went, Woolworths placed grocery items on discount at a price that was actually higher than when supplier funding was in place.

Both Woolworths and Coles have denied ACCC allegations they used fake discounts. Picture: Tertius Pickard

Items such as pet food, a popular range of Coca-Cola, Oreo biscuits and fly spray were offered by the supermarkets on discount when in fact they were sometimes 29 per cent more expensive than the “regular price” on the supermarket shelf for as much as two years before, the ACCC has alleged.

A bottle of Sprite lemonade on sale at Woolworths was 33 per cent above the original price, while at Coles a bottle of Coca-Cola was marketed as a special but 28 per cent higher than the original price, the court documents claim.

A spokeswoman for Woolworths and a spokesman for Coles declined to comment, saying the retailers couldn’t discuss an issue before the court.

Behind the scenes, lawyers for all parties continue to negotiate over an agreed sample size of the 250 grocery items used for the hearing. The likely outcome is a sample size of 12 to 16 grocery items.

Justice Michael O’Bryan who is overseeing the case previously told the parties in a court appearance it would be “absurd” to have a trial for each of the 250 grocery products caught up in the scandal.

“I am not terribly excited about the number being 12 and the number being 16. I am, of course, concerned to ensure that the parties feel that the trial on questions of liability will be effective,” Justice O’Bryan told the court in May.

Originally published as Coles, Woolworths and ACCC advance agreed facts in blockbuster sham discounting case