The Australian Competition and Consumer Commission (ACCC) has launched separate legal actions against Woolworths and Coles for allegedly breaching the Australian Consumer Law by misleading consumers through discount pricing claims on hundreds of common supermarket products.
The ACCC’s allegations relate to approximately 245 products sold by Coles and approximately 266 products sold by Woolworths at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for 12 months or more.
The ACCC alleges products were then subject to price rises of at least 15 per cent for brief periods before being placed in Woolworths “Prices Dropped” promotion or 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 Woolworths products included Tim Tams, Domino sauces, Doritos salsa, Energizer batteries, Kellogg’s cereal and hundreds of others. Coles products included Arnott’s Shapes biscuits, Band-Aids and Cadbury chocolates.
“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,” ACCC Chair Gina Cass-Gottlieb said.
“However, in the case of these products, 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.
“Hundreds of consumers were reporting prices that they did not consider was genuine.
“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 to establish a higher “was” price,” Ms Cass-Gottlieb said.
In a statement, Coles said the allegations related to a period of significant cost inflation when Coles was receiving a large number of cost price increases from suppliers.
“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 prices.”
In December 2023, following a complaint by CHOICE and an ACCC investigation, 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.
The ACCC alleges the latest conduct involves 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 the price during the short-term price spike and the date of that price.
“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,” Ms Cass-Gottlieb said.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”
In a statement, Woolworths Group said it would carefully review the claims made by the ACCC and continue to engage with the ACCC on the matter.
“Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week,” CEO Amanda Bardwell said.
“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.
“Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products.
“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,” the statement said.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.
The ACCC is seeking declarations, penalties, costs and other orders that include 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.
The ACCC alleges that the supermarkets offered certain products at a regular price for at least 180 days before increasing the price of the product by at least 15 per cent for a relatively short period of time, and subsequently placing it onto their “Prices Dropped” or “Down Down” promotions.
The ACCC 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.
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.
From at least January 1, 2021, until November 27, 2022, Woolworths offered the Oreo Family Pack Original 370g product for sale at a regular price of $3.50 on a pre-existing “Prices Dropped” promotion for at least 696 days.
On November 28, 2022, the price was increased to $5.00 for a period of 22 days. On December 20, 2022, the product was placed on a “Prices Dropped” promotion with the tickets showing a “Prices Dropped” price of $4.50 and a “was” price of $5.00. The “Prices Dropped” price of $4.50 was in fact 29 per cent higher than the product’s previous regular price of $3.50.
The ACCC alleges Woolworths had planned the temporary price spike to establish a new higher “was” price for the subsequent “promotion.”
Woolworths had decided – after a request from the supplier for a price increase – on or around November 18, 2022 to take the product off “Prices Dropped”, increase the price, and then put the product back on to “Prices Dropped” three weeks later.
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.
From at least January 1, 2021, until October 11, 2022, Coles offered the Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale at a regular price of $5.50 (on a pre-existing “Down Down” promotion) for at least 649 days, including one seven-day short-term special.
On October 12, 2022, the price was then increased to $7.00 for a period of 28 days. On November 9, 2022, the product was placed on a “Down Down” promotion with the tickets showing a “Down Down” price of $6.00 and a “was” price of $7.00. The “Down Down” price of $6.00 was in fact 9 per cent higher than the product’s previous regular price of $5.50.
In this example, the ACCC alleges Coles had planned the temporary price spike to establish a new higher “was” price for the subsequent “promotion”.
Coles had decided – after a request from the supplier for a price increase – on or around October 7, 2022, to take the product off “Down Down” increase the price, and then put the product back on to “Down Down” four weeks later.
The ACCC identified the alleged conduct through consumers contacting the ACCC and social media monitoring. An in-depth investigation using its compulsory powers was then commenced.
In January 2024, the Treasurer, Jim Chalmers ordered the ACCC to conduct an inquiry into the Australian supermarket sector, pricing practices and the relationship between wholesale, farmgate and retail prices.
The investigation into the conduct related to these proceedings pre-dates this inquiry. The inquiry will not consider the issues in dispute in these proceedings.
Separate proceedings are being brought against Woolworths and Coles.
The ACCC is not making any allegation of any collusion or anti-competitive conduct by Woolworths and Coles nor alleging any contravention of the Australian Consumer Law (ACL) by any of Woolworths’ and Coles’ suppliers in these proceedings.
The maximum penalty for each breach of the Australian Consumer Law increased on November 10, 2022, part-way through the period of the alleged conduct. For contraventions from 10 November 10, 2022, the maximum penalty is 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.
Any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings. The ACCC will not comment on what penalties the Court may impose.
Woolworths runs the largest supermarket chain in Australia, with about 1,140 Woolworths supermarket stores across the country.
The “Prices Dropped” Program is promoted by Woolworths as a shelf price reduction program designed to offer Woolworths customers consistently low prices over a prolonged period.
The objective of the “Prices Dropped” Program was to lower the standard shelf price of a product from its previous standard (or regular) shelf price.
Woolworths says it will review the claims and work with the ACCC.
Coles is the second-largest supermarket chain in Australia, operating more than 840 stores nationally.
Coles introduced the “Down Down” Program in June 2010 and marketed it as a promotional campaign designed to reduce the regular shelf price of commonly purchased products — thereby offering customers predictable and reliable value on the items they purchased the most and reducing the cost of their shopping basket.
Coles says it will defend the proceedings.
“We are emphasising the seriousness for both supermarkets,” Ms Cass-Gottlieb says.
“We do consider it is significant behaviour for each of them and don’t think that actually it does justice to either to make a comparison.”
Asked at a press conference if the ACCC were recommending if any leadership figures should step down, Ms Cass-Gottlieb said: “that was a decision for the supermarkets.”
Coles and Woolworths have seen their share prices savaged.
This article has been amended with the sentence “Coles and Woolworths have seen their share prices savaged” as Coles & Woolworths shares plunged on the ASX Stock Exchange following the publication of this article this morning.
