Australia’s consumer watchdog is suing Coles and Woolworths in separate proceedings over misleading price-drop promotions.
Key Takeaways
- The ACCC is suing Coles and Woolworths in separate proceedings for allegedly breaching Australian Consumer Law by instilling misleading discount pricing claims.
- Australia’s consumer watchdog alleges Woolworths and Coles increased prices on certain products by at least 15% for brief periods before placing them back on price-drop promotions at prices lower than those during the spike, but higher than or the same as the regular price before the 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 maximum penalty for each breach of the law is $50,000,000 (for each contravention post-10 November 2022).
Key background
Australian supermarkets like Coles and Woolworths have been under scrutiny following the announcement of a senate inquiry in January this year, which planned to look into and report on the price setting practices and market power of the country’s major supermarkets.
But the ACCC’s investigation into misleading price-drop practices actually pre-dates that: the watchdog says it identified the conduct through consumer contacts to the ACCC and social media monitoring.
Woolworths (which runs the largest supermarket chain in Australia, with about 1,140 stores), runs a ‘Prices Dropped’ program, which looks like a shelf-price reduction designed to offer customers consistently low prices over a prolonged period. The objective is to lower the standard shelf price of a product from its previous standard. But the ACCC alleges the retailer was hiking prices prior to the promotion, then slashing them to their pre-hike-price. Coles was doing something similar with its ‘Down Down’ program.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where,” Cass-Gottlieb says.
Crucial quote
“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,” ACCC Chair, Gina Cass-Gottlieb, says.
Big number
$50,000,000. That’s how much the supermarkets could be up for in fines for each breach of the law (a penalty that increased part-way through the period of the conduct) after 10 November, 2022.
Though, the penalty is actually the greater of:
- $50,000,000
- if the Court can determine the value of the ‘reasonably attributable’ benefit obtained, three times that value, or
- if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30 per cent of the corporation’s adjusted turnover during the breach turnover period for the contravention.
Look back on the week that was with hand-picked articles from Australia and around the world. Sign up to the Forbes Australia newsletter here or become a member here.
