ACCC takes Coles and Woolworths to court over ‘misleading’ grocery discounts

The Australian Competition and Consumer Commission has launched separate actions in the federal Court against Woolworths and Coles with allegations that the retailers had temporarily spiked the prices of these goods before reducing them under these respective savings labels to prices that were higher than, or the same as, the regular price that applied before the price 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,” says 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.

“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 for the purpose of establishing a higher ‘was’ price.”

The ACCC investigation alleges that this conduct involved 266 products for Woolworths over a 20-month period 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 what the price was during the short-term price spike and the date of that price.

The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived “significant revenue” from those sales.

However, in statements to the ASX this morning Coles and Woolworths acknowledged notice of the proceedings issued by the ACCC.

Coles, which says it intends to defend the proceedings, says the allegations which cover the period from February 2022 to May 2023, relate to “a period of significant cost inflation when Coles was receiving a large number of cost price increases from our suppliers” while Coles’ own costs were rising.

This led to an increase in the retail price of many products, the company says.

“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,” says the company.

Coles and Woolworths both note the inflationary pressures on consumers in recent years and their efforts to contain price increases.

“Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products,” says Woolworths CEO Amanda Bardwell, with the company adding that it will “carefully review” the claims made by the ACCC.

The ACCC launched its investigation into the practice after being contacted by consumers and via social media monitoring.

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

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

“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”

The ACCC lists multiple examples of the alleged practices by Coles and Woolworths.

The consumer authority alleges that Woolworths made false or misleading representations to consumers about the prices of 266 products between September 2021 and May 2023.

Among the products are 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, Palmolive dishwashing liquid, Raid insect spray and Sprite soft drink.

In one example, from at least 1 January 2021 until 27 November 2022, Woolworths is said to have 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 28 November 2022, the price was increased to $5.00 for a period of 22 days, but on 20 December 2022, the product was placed on a ‘Prices Dropped’ promotion at $4.50. The ACCC says the new price of $4.50 was 29 per cent higher than the product’s previous regular price of $3.50.

Similarly, the ACCC alleges that Coles made false or misleading representations to consumers about the prices of 245 products between February 2022 and May 2023.

This includes 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, Kellogg’s snack bars, Kleenex tissues, Libra tampons and Lurpak butter.

 The ACCC cites an example where Coles, from at least 1 January 2021 until 11 October 2022, offered the Strepsils Throat Lozenges Honey and 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 12 October 2022, the price was then increased to $7 for a period of 28 days, but on 9 November 2022 the product was placed on a ‘Down Down’ promotion at a price of $6 with a “was” price of $7.

But the ACCC says the ‘Down Down’ price of $6 was 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’.

The ACCC says that after a request from the supplier for a price increase, Coles had decided that on or around 7 October 2022 to take the product off “Down Down”, increase the price and then put the product back on to “Down Down” four weeks later.

Consumer group CHOICE has welcomed the ACCC's legal action against Coles and Woolworths.

"We know from our extensive work in this area that promotional labels at the major supermarkets often confuse shoppers, and the frequent changes in prices make it difficult to tell whether there is a genuine discount or not,” says Rosie Thomas, director of campaigns at CHOICE.

“Earlier this year, our nationally representative research revealed that on average one in four people found it difficult to identify if certain supermarket labels represented a true discount or not. ‘Down Down’ labels at Coles and ‘Prices Dropped’ labels at Woolworths were among those that caused confusion for consumers.

“This kind of bad behaviour from the supermarkets is exactly why we gave Coles and Woolworths a Shonky in 2023, and it urgently needs to be addressed - particularly during a cost-of-living crisis when people are doing it tough.” 

The ACCC is seeking declarations, penalties, costs and other orders against Coles and Woolworths.

The ACCC is also 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.