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 defended accusations of fake discounts by saying almost all were price hike requests from food and grocery suppliers to make later discounts indeed genuine, giving a glimpse for the first time of their defence against sensational allegations of misleading discounts by the regulator.

This was crucial to acknowledge, the supermarkets argued in the Federal Court on Wednesday, as a period of high inflation put pressure on suppliers who sought to recover their costs and meant the discounts later offered by Woolworths and Coles were real and not “illusory” as is claimed by the Australian Competition & Consumer Commission.

Appearing in court for a directions hearing, it seems the key thrust of Woolworths and Coles defence will be the initial price hikes pushed through by both retailers that preceded a flood of discounts on hundreds of grocery items is the base for which later promotions needed to be assessed.

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

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

Strongly pushing back against the ACCC’s sensational allegations against the chains, 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” raised prices on more than 250 items tracked and recorded 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,” John Sheahan KC, counsel for Coles, told the court.

Mr Sheahan KC said 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.”

However, counsel for the ACCC, Sarida McLeod, was quick to hit back and, in a brief comment, brushed aside the arguments from Woolworths and Coles lawyers before the judge.

“For your honour’s benefit and in terms of where this is going, 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 them to spruik 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 now in court on Wednesday as lawyers appeared before Justice O’Bryan for a directions hearing the public has been provided with the initial outlines of their defences and attempts to puncture holes in the ACCC case.

Counsel for Coles, Mr Sheahan KC, told the court that Coles did not see this as a case that could be addressed adequately by only referencing a narrow set of facts with impacts for suppliers and customers.

Mr Sheahan KC briefly outlined his client’s case and said the evidence would show that when price requests from suppliers came in they were investigated by Coles to test if they were “well grounded”.

“That’s the framework that will be developed,” he said.

Mr Moore SC, counsel for Woolworths, said the issue of genuine price hikes followed by discounts was one that would “loom quite large”.

“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”.

Meanwhile, although Woolworths and Coles face similar accusations around the use of alleged false and misleading discounts on grocery items, the twin cases brought against the pair by the competition regulator 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 through the case each supermarket might have different facts and trajectories and the cases could need to be separated.

The case is continuing.