The Australian Competition and Consumer Commission (ACCC) is suing Coles and Woolworths for allegedly misleading customers.
In separate lawsuits, the consumer watchdog alleges the two supermarket chains breached consumer law by using “discount pricing claims” to mislead customers.
Woolworths has said it will “engage with the ACCC” on the issue, and Coles said it “intends to defend” the action.
Background
Coles and Woolworths control around two-thirds of the supermarket sector.
In the 2023/24 financial year, Coles reported its net profits increased 2% to $1.1 billion. Woolworths reported a $1.7 billion profit for the same period (down 0.6%) .
There are multiple ongoing inquiries – including one led by the ACCC – into supermarkets’ price-setting practices. The ACCC report is due in February.
On Monday, the watchdog announced it’s suing the major supermarkets in separate lawsuits.
Woolworths
The ACCC analysed the price of hundreds of grocery items being sold by Woolworths from September 2021 to May 2023.
It alleges Woolworths made misleading discount pricing claims on 266 products — by using “was, now” pricing. (e.g. selling a tub of ice cream that “was” $7, and is “now” $6).
The ACCC accused Woolies of misleading customers across a range of staple items, like cereal, pet food, coffee, dishwashing liquid, and sanitary products.
The ACCC used Woolworths’ Oreo price strategy to provide an example of the supermarket’s alleged misconduct.
Between 2020 and 2022, a standard pack of Oreos cost $3.50 at Woolies.
In November 2022, the ACCC noted this price was increased to $5 a packet.
After 22 days, Woolworths changed the cost of Oreos again, to $4.50.
It then advertised the product as being discounted, despite a packet of Oreos becoming $1 more expensive in a period of less than one month.
Coles
The ACCC also analysed the price of hundreds of Coles grocery items from February 2022 to May 2023.
The supermarket is accused of using misleading pricing across 245 products.
The ACCC accused Coles of misleading customers across a wide range of products. This is including Band-Aids, Shapes, butter, throat lozenges and paper towels.
For example, Coles sold Strepsils Honey & Lemon Lozenges for $5.50 for around two years.
It increased the price to $7 in October 2022.
The next month, the Strepsils were advertised with the supermarket’s “Down Down” discount label for $6.00 — $0.50 higher than the original price.
Price spike
The ACCC accused the retailers of using the “Prices Dropped” (Woolies) and “Down Down” (Coles) tags to unlawfully mislead customers.
It argues the retailers did this through “price spiking”. This is when products become more expensive, briefly, before being “reduced” to a price that is more expensive or the same as before.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where,” ACCC Chair Gina Cass-Gottlieb said.
Cass-Gottlieb said in “many” cases, Coles and Woolies, “implemented the temporary price spike for the purpose of establishing a higher ‘was’ price”.
The ACCC has now launched proceedings, suing both Coles and Woolworths in the Federal Court for breaching Consumer Law.
It’s seeking “significant” cost penalties and mandatory community service. This would order the retailers to fund a registered food/meal service charity.
“The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.”
Code of Conduct
In April, a supermarket review recommended a mandatory Food and Grocery Code of Conduct. This is a framework that could lead to “multimillion-dollar penalties for serious breaches.”
On Monday, the Prime Minister announced a draft code would be introduced to Parliament before the end of the year.
“Advertised discounts need to be genuine… Specials need to be real because household budgets are tight,” Anthony Albanese said. He called the allegations against Coles and Woolies “serious,” and welcomed the ACCC, “standing with supermarket shoppers”.
Response
Woolworths said it “will carefully review the claims made by the ACCC”.
CEO Amanda Bardwell said: “We remain committed to offering many ways for customers to save at the
checkout”.
Coles said the ACCC’s allegations “relate to a period of significant cost inflation” in 2022-23. It said it faced “cost price increases” from suppliers at the time, “which led to an increase in the retail price of many products.”
Coles said it “intends to defend the proceedings.”
