Woolworths and Coles have been accused of breaching Australian Consumer Law, after an investigation revealed they have been misleading consumers through discount pricing claims on hundreds of common supermarket products. The Australian Competition and Consumer Commission (ACCC) has commenced Federal Court proceedings with both companies, with a maximum expected penalty of $150 million.
The ACCC’s allegations relate to products sold by each of Woolworths and Coles at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year.
Both companies share prices dropped after the announcement, with Woolworths dropping 4.3 per cent, from $34.98 at previous close to $33.48 this morning, and Coles dropping 3.7 percent, from $19.22 to $18.51.
Prime Minister Anthony Albanese initially announced the 12-month inquiry into pricing within the supermarket industry in late January, with the ACCC set up to examine supermarkets’ pricing practices, the relationship between wholesale – including farm gate – and retail prices, and competition in the sector.
Prior to this announcement, the last competition inquiry was conducted in 2008, which found more than 700 potentially restrictive leases in shopping centres that prevented them from leasing space to other supermarkets. Coles and Woolworths provided enforceable undertakings to no longer do so.
The ACCC identified the supermarkets recent pricing conduct through consumer contacts to the ACCC and social media monitoring, and then conducted an in-depth investigation using its compulsory powers.
The products under scrutiny were subject to price rises of at least 15 per cent for brief periods, before being placed in Woolworths’ ‘Prices Dropped’ promotion and Coles’ ‘Down Down’ promotion, at prices lower than during the price spike but higher than, or the same as, the regular price that applied before the price spike.
The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months. The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually with a ‘was’ price displayed showing what the price was during the short-term price spike and the date of that price.
ACCC chair, Gina Cass-Gottlieb, said following many years of marketing campaigns by Woolworths and Coles, Australian consumers have come to understand that the ‘Prices Dropped’ and ‘Down Down’ promotions relate to a sustained reduction in the regular prices of supermarket products.
“However, in the case of these products, we allege the new ‘Prices Dropped’ and ‘Down Down’ promotional prices were actually higher than, or the same as, the previous regular price,” said Cass-Gottlieb.
“We allege that each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory.
“We also allege that in many cases both Woolworths and Coles had already planned to later place the products on a ‘Prices Dropped’ or ‘Down Down’ promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher ‘was’ price,” she said.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales, and is seeking declarations, penalties, costs and other orders.
The organisation is also seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs. Both companies have been working with food rescue and relief companies – including OzHarvest, Foodbank, SecondBite, and FareShare – for over a decade.
“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures. It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims,” said Cass-Gottlieb.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”
Both companies have already received a reputational downfall over the past year, with research from statistics company, Roy Morgan, showing that in December 2023 Coles was ranked Australia’s fifth most trusted brand, before falling 221 places by March 2024 to become Australia’s ninth most distrusted brand.
On the same timeline, Woolworths fell 32 places, from being Australia’s second most trusted brand in December, to 34 in March. It will be interesting to see how these allegations and the results will affect both companies' reputational standing in the Australian consciousness.
Alleged conduct
The ACCC alleges that the supermarkets offered certain products at a regular price for at least 180 days. They then increased the price of the product by at least 15 per cent for a relatively short period of time, and subsequently placed it onto their Prices Dropped or Down Down program.
The organisation alleges the display of the Prices Dropped and Down Down tickets was misleading, as the price of the products was in fact higher than or the same as the regular price at which the supermarket had previously offered the products for sale.
Woolworths
Woolworths runs the largest supermarket chain in Australia, with about 1,140 Woolworths supermarket stores across the country. The ACCC alleges that Woolworths made false or misleading representations to consumers about the prices of 266 products during the period between September 2021 and May 2023.
Products affected include Arnott’s Tim Tams biscuits, Dolmio sauces, Doritos salsa, Energizer batteries, Friskies cat food, Kellogg’s cereal, President butter, Listerine mouthwash, Moccona coffee capsules, Mother energy drinks, Mr Chen’s noodles, Nicorette patches, Ocean Blue smoked salmon, Oreo cookies, Palmolive dishwashing liquid, Raid insect spray, Sprite soft drink, Stayfree pads, Twisties, Uncle Tobys muesli bars, and Vicks VapoDrops.
Oreo Family Pack pricing at Woolworths from Jan 2021-May 2023. Source: ACCC
In an ASX announcement, Woolworths Group acknowledged the legal proceedings by the ACCC, and stated it “will carefully review the claims made by the ACCC and will continue to
engage with the ACCC on the matter”.
Woolworths Group CEO, Amanda Bardwell, said the Prices Dropped program was introduced to provide customers with great everyday value on their favourite products.
“Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week,” said Bardwell.
“Our customers are telling us they want us to work even harder to deliver meaningful value to them and it’s important they can trust the value they see when shopping our stores.
“We remain committed to offering many ways for customers to save at the checkout, including thousands of weekly specials, everyday low prices on household essentials, a great value own brand range and through our Everyday Rewards program.”
Coles
Coles is the second-largest supermarket chain in Australia, operating more than 840 stores nationally. The ACCC alleges that Coles made false or misleading representations to consumers about the prices of 245 products during the period between February 2022 and May 2023.
Products include Arnott’s Shapes biscuits, Band-Aids, Bega cheese, Cadbury chocolates, Coca Cola soft drink, Colgate toothpaste, Danone yoghurt, Dettol multi-purpose wipes, Fab laundry liquid, Karicare formula, Kellogg’s snack bars, Kleenex tissues, Libra tampons, Lurpak butter, Maggi two-minute noodles, Nature’s Gift dog food, Nescafe instant coffee, Palmolive shampoo, Rexona deodorant, Sakata rice crackers, Sanitarium Weet-Bix cereal, Strepsils lozenges, Sunrice rice, Tena pads, Viva paper towels, Whiskas cat food, and Zafarelli pasta.
Strepsil Throat Lozenges pricing at Coles from Jan 2021-May 2023. Source: ACCC
Separate to these proceedings, in December 2023, following a complaint by consumer advocacy group, Choice, and an investigation by the ACCC, Coles announced refunds for thousands of customers after it raised the price on 20 products that it had promised would remain ‘locked’ for a certain period of time as part of Coles’ ‘Dropped and Locked’ promotion.
Coles Group stated in an announcement this morning that it intends to defend the current proceedings, and that the allegations relate to “a period of significant cost inflation when Coles was receiving a large number of cost price increases from our suppliers and, in addition, Coles’ own costs were rising, which led to an increase in the retail price of many products”.
The statement said 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: “Coles is acutely aware of the cost-of-living pressures affecting households and continually seeks to deliver value to our customers. We do this in a variety of ways including promotional campaigns, every day low prices, Coles Own Brand and Flybuys. The Down Down program is one type of promotional campaign involving a longer-term reduction in the retail price of a product, and has been important in delivering lower prices to our customers and driving
volume for our suppliers for many years”.
