Coles and Woolworths face court action over claims of misleading discounting by ACCC

Promises made by Coles and Woolworths to offer best prices for cash-strapped shoppers have been rubbished by Australia’s consumer watchdog, which claims the nation’s two biggest grocery chains have engaged in misleading discounting.

The Australian Competition and Consumer Commission on Monday said it had launched separate legal actions in the Federal Court against the two supermarkets for allegedly breaching consumer law by misleading consumers through “illusory” discount pricing claims on hundreds of common grocery products.

Some of the products include Tim Tam, Arnott’s Shapes, Twisties, Coca Cola, Colgate toothpaste, Kleenex tissues, Lurpak butter, Nature’s Gift dog food, Nescafe instant coffee, Weet-Bix, Sunrice rice, Viva paper towels, Whiskas cat food and Zafarelli pasta.

Amid the cost-of-living crisis, Coles promoted its long-running “Down, Down” campaign as a lifeline for cost-conscious shoppers struggling to make ends meet as inflation pushed up prices on everyday items.

Woolworths did the same with its “Prices Dropped” pitch.

The claims involve 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months, amounting to “tens of millions” in sales from which both chains “derived significant revenue”, the ACCC said.

The allegations relate to products sold in store and online by 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.

The ACCC claims the price of the products then rose at least 15 per cent for brief periods, before being placed in the Prices Dropped and Down Down promotions at prices lower than during the price spike — but higher than, or the same as, the regular price that applied before the price rise.

“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,” said ACCC chair Gina Cass-Gottlieb.

“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.

“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.”

The ACCC also claims that Woolworths and Coles had, in many cases, 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 in order to established a higher “was” price.

Ms Cass-Gottlieb said the alleged behaviour diminished the ability of consumers to make informed choices about what products to buy, and where.

“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures,” she said.

“It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims.”

The ACCC is seeking a court-imposed fine and declarations from both Coles and Woolworths. They would also be required to fund a registered charity to deliver meals to Australians in need, above and beyond such charitable programs already in place.

The claims come amid continued backlash from customers about higher prices for a basket of groceries. Both Coles and Woolworths have faced increased regulatory scrutiny and been forced to front multiple government inquiries into claims of profiteering.

Woolworths said it was “carefully” reviewing the ACCC’s claims.

Chief executive Amanda Bardwell — who only took on the top job three weeks ago — said it was important for customers to “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,” Ms Bardwell said.

“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.”

Woolworths was the biggest loser in Roy Morgan’s latest risk monitor survey, rising a massive 194 places to be the fifth-most distrusted brand in the June quarter. Coles rose a further five places from ninth to fourth-most distrusted.

Coles has vowed to defend the court action, arguing the allegations related “to a period of significant cost inflation” when it was receiving a large number of cost price increases from suppliers and faced its own cost rises “which led to an increase in the retail price of many products”.

“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.

“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.”

Woolworths’ Australian food sales rose 5.6 per cent to $50.7 billion last financial year while Coles sales gained 6.2 per cent to $39b.

How ACCC says the cookie crumbled

In one example of how the grocers allegedly mislead shoppers, the consumer watchdog pointed to Oreo biscuits.

It said that from January 1, 2021 to November 27, 2022, Woolworths was selling the Oreo Family Pack Original 370g product for $3.50 on a pre-existing Prices Dropped promotion for at least 696 days.

On November 28, 2022, the price was increased to $5 for 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.

The price of $4.50 was, in fact, 29 per cent higher than the product’s previous regular price of $3.50.

“In this example, the ACCC alleges Woolworths had planned the temporary price spike to establish a new higher “was” price for the subsequent ‘promotion’,” the watchdog said.

“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.”

Products covered at Woolworths

Products covered by the court action included Tim Tams, 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.

Products covered at Woolworths

Products covered 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.