Australia’s two biggest supermarket chains will face court after allegedly misleading buyers with fake discounts.
The Australian Competition & Consumer Commission launched legal action in the federal court against Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd on Monday.
The watchdog claims both retailers bumped the prices of products by 15 per cent for brief periods before placing them 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.
ACCC chair Gina Cass-Gottlieb said the duopoly breached consumer law by making “misleading claims about discounts, when the discounts were, in fact, illusory”.
She alleged that in many cases the supermarket giants had already planned to later place products on special before the price spike and implemented the temporary rise for the purpose of establishing a higher ‘was’ price”.
“We encourage discounts, genuine discounts matter for consumers, but they need to be genuine,” Ms Cass-Gottlieb told reporters on Monday.
“(We) allege that in many cases, Woolworths and Coles planned the temporary price spike in order to establish a new higher ‘was’ price.”
The allegations relate to 266 products for Woolworths sold at different times across 20 months and 245 products for Coles sold 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.
The chair said the estimated revenue from the supermarkets discount schemes could be in the millions.
“We can see millions of units of product were sold … for millions of dollars of revenue,” she said.
The watchdog said it identified the offending conduct through consumer contacts and social media monitoring, and then conducted an in-depth investigation using its compulsory powers.
“We then tracked social media and saw on X, Reddit and TikTok that hundreds of consumers were reporting prices that they did not consider were genuine, we followed that up with our own depth investigations powers,” Ms Cass-Gottlieb said.
Woolworths allegedly began the practice in September 2021 and Coles began in February 2022.
The investigation wrapped up in 2023, but Ms Cass-Gottlieb said the practices could still be happening.
“There are submissions and statements by each of the supermarkets that they have changed their behaviour,” she said.
“We are not, at this time, able to confirm that they have made sufficient changes in order to address each of the elements.”
It is seeking penalties, costs and community service orders for supermarkets to fund registered charities to deliver meals to vulnerable Australians.
Coles said in a statement on Monday it would fight the proceedings.
“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,” it 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.
Woolworths acknowledged the legal action and claimed it related to ‘historical’ pricing schemes.
“Our Prices Dropped program was introduced to provide customers with great everyday value on their favourite products,” CEO Amanda Bardwell said in a statement.
“We remain committed to offering many ways for customers to save at the checkout.”
Just after 11am AEST, Coles and Woolworths shares were down 3.4 per cent, to an 18-day low of $18.56 and a six-week low of $33.78, respectively.
