Woolworths and Coles accused of disgraceful act

Australia’s two largest supermarket chains are appearing in court over allegations they misled customers with fake discounts.

The Australian Competition & Consumer Commission on Monday filed a lawsuit in the Federal Court against Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd.

The Consumers’ Association alleges that both retailers increased the prices of their products by 15 per cent for a short period before implementing the Woolworths Prices Dropped promotion and Coles’ Prices Down promotion at prices that were effectively the same as or higher than the normal price.

They are both accused of doing this with hundreds of different product lines.

ACCC chair Gina Cass-Gottlieb said the duopoly breached consumer law by making “misleading claims about discounts when in fact the discounts were an illusion”.

“It is vital that Australian consumers can trust that prices and discounts are right,” Cass-Gottlieb said.

“We argue that these misleading claims about illusory discounts hinder consumers’ ability to make informed choices about which products to buy and where.”

The allegations relate to 266 Woolworths products sold at various times over a 20-month period, and 245 Coles products sold at various times over a 15-month period.

The representations were made on price tags that consumers saw in-store and online. Typically, a “wash” price was displayed, indicating what the price was during the brief price increase.

The ACCC estimated in a statement that Woolworths and Coles generated “significant” revenue from selling “tens of millions” of the reportedly affected products.

The regulator gave examples of supermarket giants allegedly raising prices to create a new ‘wash’ price and thus promote misleading discounts.

They allege that Woolworths set the price of a family-sized pack of Oreo biscuits at $3.50 for at least 696 days, before increasing it to $5 on November 22, 2022.

The higher price was maintained for only 22 days, after which the promotion was reinstated at $4.50, with a ‘wash’ price of $5.00. In effect, Woolworths is being accused of increasing the price of the biscuits when they were advertised as being on sale.

“Woolworths (following a request from the supplier for a price increase) decided on or around 18 November 2022 to remove the product from the ‘Prices Reduced’ list, increase the price and then place the product back on the ‘Prices Reduced’ list three weeks later,” the statement said.

The ACCC alleged that Coles operated a similar scheme with Strepsils throat lozenges, which cost consumers $5.50 for at least 649 days.

“On October 12, 2022, the price was increased to $7.00 for a period of 28 days,” the statement said.

‘The false or misleading representations related to the price of basic household goods at a time when the cost of living was increasing. They were made in the context of a programme that Woolworths specifically promoted as helping consumers save money on their grocery bills in the long term.

‘Through its conduct, Woolworths has limited consumers’ ability to make informed choices about their essential purchases.’

‘On November 9, 2022, the product was placed in a ‘Down Down’ promotion where tickets displayed a ‘Down Down’ price of $6.00 and a ‘Wash’ price of $7.00.

The “Down Down” price of $6.00 was actually 9 percent higher than the product’s previous regular price of $5.50.

‘As a result of Coles’ conduct, consumers shopping both in-store and online may have purchased products based on incorrect or misleading information.’

The watchdog is seeking fines, costs and community service orders from supermarkets that fund registered charities to deliver meals to vulnerable Australians.

Some of the allegations were made after November 10, 2022, when the maximum penalty for breaches of the Australian Consumer Law was increased.

Violations after that date could cost the supermarket giants three times the value of the “reasonably attributable” benefit obtained, 30 percent of sales during the period of the violation or $50,000,000, whichever is higher.

Woolworths Group said in a statement to the ASX on Monday that it “will carefully review the ACCC’s claims and will continue to engage with the ACCC on this matter”.

“Cost of living pressures remain a significant concern for the millions of Australians who shop with us every week,” said Amanda Bardwell, Woolworths Group CEO.

“Our customers tell us they want us to work even harder to deliver meaningful value to them. It’s important that they can trust the value they see when they shop in our stores.

“We remain committed to providing customers with many ways to save at checkout.”

Coles said it was “very aware of the pressures on the cost of living” and that it planned to defend the allegations in a statement to the stock exchange.

The statement said the price increase for products was due to the supermarket covering its own cost increases as a result of “significant” inflation.

“Coles sought to strike a balance between managing the impact of cost price increases on selling prices and delivering value to customers by resuming promotional activity as soon as possible after the introduction of the new, non-promotional price,” the statement said.

‘In line with our values, Coles takes compliance with the Australian Consumer Law very seriously and is committed to building trust with all stakeholders, especially our customers.’