‘Price down’ supermarket specials pushed up inflation: PM

Prime Minister Anthony Albanese has accused Coles and Woolworths of adding to inflation and higher interest rates after the competition watchdog alleged the supermarket giants manipulated prices on hundreds of everyday staples to boost their bottom lines.

The two companies face fines of potentially hundreds of millions of dollars for misleading their customers by sharply pushing up the prices on 511 goods since late 2022, before cutting them and then re-setting the prices up to 29 per cent higher than their original level.

The nation’s supermarket giants have been accused of misleading consumers with their key discount price campaigns.Credit: iStock

The items, including Oreos, Tim Tams, Kellogg’s cereals, Bega cheese and Moccona coffee, formed part of Woolworths’ “Prices Dropped” and Coles’ “Down Down” campaigns, which have for years promised their customers long-term price stability.

Australian Competition and Consumer Commission chair Gina Cass-Gottlieb said she was seeking significant penalties against the companies for offering “illusory discounts” when many consumers were struggling to make ends meet.

Fines can reach $50 million for each breach, as well as a donation of grocery products to various charities.

Cass-Gottlieb said the companies – which are responsible for two-thirds of the nation’s grocery sales – had used their long-term promotions to convince shoppers that prices were being held steady when in reality they had pushed them up.

“For many years, each of us, as consumers, will have seen the campaigns of Woolworths and Coles that have led us to understand that the “Prices Dropped” and “Down Down” prices promotions relate to sustained reductions in regular pricing,” she said.

“In these cases, however, the new “Prices Dropped” and “Down Down” promotions were actually higher or the same as the prior regular price.”

During the period in which Coles and Woolworths were alleged to have pushed up their prices, more than half of respondents to this masthead’s exclusive Resolve Political Monitor survey cited grocery prices as their biggest cost-of-living pressure.

Albanese said customers did not deserve to be treated as fools by the supermarkets.

Releasing for public consultation the proposed supermarket mandatory code of conduct, which includes penalties of up to $10 million for breaches, the prime minister said price rises added to the inflation the Reserve Bank was trying to bring down with interest rate increases.

“When you’re charging more for products than you should, it of course has an inflationary impact by definition,” he said.

“And we know that inflation is what the Reserve Bank is concentrating on in terms of monetary policy, as they should, to try to get it down to the band of 2 to 3 per cent.”

Cass-Gottlieb alleged the discounting occurred between February 2022 and May 2023 for Coles, and September 2021 and May 2023 for Woolworths. The annual inflation rate peaked at 7.8 per cent in December 2022.

The competition watchdog says the supermarkets’ actions breached Australian consumer law by misleading customers. Woolworths (266 items) and Coles (245 products) allegedly displayed a reduced price and a “was” price that was actually the temporarily increased price, allowing them to charge more for items while appearing to offer discounts.

The items included supermarket staples such as Sprite, Colgate toothpaste, Maggi noodles, Weet-Bix, Sakata, Whiskas cat food and more.

The ACCC said Woolworths sold Oreo family packs for $3.50 for nearly two years between January 2021 and late November 2022. On November 28, 2022, the supermarket hiked the price to $5 for 22 days, and on December 20, put the Oreo family pack on a “Price Dropped” promotion of $4.50 – 29 per cent higher than the original price.

Coles allegedly sold 16-packs of Strepsils honey and lemon throat lozenges for $5.50 between at least early January 2021 and October 11, 2022. The price was raised to $7 on October 12 for 28 days and then lowered to $6 as part of its “Down Down” promotions.

Coles said it would defend its actions, using a statement to the stock exchange to argue it was aware of consumers’ cost-of-living pressures.

“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,” it said.

Woolworths has not yet committed to defending proceedings. But it said in a statement that it would “carefully review the claims made by the ACCC and will continue to engage with the ACCC on the matter”.

“It’s important they can trust the value they see when shopping our stores,” Woolworths’ new chief executive, Amanda Bardwell, said.

Prime Minister Anthony Albanese said price rises added to the inflation the Reserve Bank was trying to bring down with interest rate increases.Credit: Alex Ellinghausen

Both companies’ share prices fell by more than 3 per cent, or a combined $2 billion, on a day when the sharemarket was down by 0.7 per cent.

Shadow treasurer Angus Taylor said misleading discounting was unacceptable.

“It’s crucial that we have fair and transparent price advertising, and if there’s been misleading discounting, that’s completely unacceptable and appropriate action should be taken,” he said.

Greens senator Nick McKim reiterated calls for a break-up of the “supermarket duopoly” and a crackdown on price gouging.

“Coles and Woolworths have exploited a national crisis to overcharge people,” he said. “This is price gouging, plain and simple.”

Last week, the Business Council of Australia – of which both Coles and Woolworths are members – attacked the government for its handling of the economy, inflation and industrial relations.

The council’s chief executive, Bran Black, said he would not be drawn on the allegations.

“The ACCC has made a number of allegations against Woolworths and Coles and it is appropriate these allegations are tested in court,” he said.

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