For months now, major retail chains Woolworths (ASX:WOW) and Coles (ASX:COL), along with business groups, media, and analysts, have denied any allegations of price gouging occurring in supermarkets.
These allegations received a boost from a move revealed on Monday by the competition and consumer watchdog, the ACCC, which has accused Woolworths and Coles of misleading customers regarding discounts and pricing.
In Federal Court action against Woolworths and Coles, the ACCC stated that the two retailers breached Australian consumer law by misleading consumers through discount pricing claims on hundreds of common supermarket products.
The Commission's allegations pertain to products sold by Woolworths and Coles at regular long-term prices that remained unchanged, excluding short-term specials, for at least six months, and in many cases, for at least a year.
These products were subject to price increases of at least 15% for brief periods before being included in Woolworths’ ‘Prices Dropped’ promotion and Coles’ ‘Down Down’ promotion, at prices lower than those during the price spike but higher than, or the same as, the regular price that applied before the spike.
“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,” she continued.
“We allege that both Woolworths and Coles breached 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 place the products on a ‘Prices Dropped’ or ‘Down Down’ promotion before the price spike and implemented the temporary price increase to establish a higher ‘was’ price,” Ms Cass-Gottlieb said.
The ACCC alleges that this conduct involved 266 products for Woolworths at different times over 20 months, and 245 products for Coles at different times over 15 months. The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually showing a ‘was’ price indicating what the price was during the short-term price spike and the date of that price.
The ACCC identified this conduct through consumer contacts and social media monitoring, followed by an in-depth investigation using its compulsory powers.
“We allege these misleading claims about illusory discounts diminished consumers’ ability to make informed choices about what products to buy and where,” Ms Cass-Gottlieb said in Monday’s announcement.
The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.
In its Federal Court action, the ACCC is seeking declarations, penalties, costs, and other orders to be applied against the two retail giants.
The ACCC is also seeking community service orders requiring Woolworths and Coles to each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.
Woolworths' new CEO, Amanda Bardwell, stated that the company noted the action and will continue to engage with the Commission on the matter.
Coles took a different approach, explaining its thinking on pricing in a period of high inflation, and ended its statement by saying it will defend the proceedings—something Woolworths did not mention in its statement.
