Australian supermarkets Coles, Woolworths sued over deceptive pricing tactics

Australia’s two largest supermarket chains, Coles and Woolworths, have landed in legal trouble after the Australian Competition and Consumer Commission (ACCC) filed lawsuits against them.

The supermarkets are accused of misleading customers about discounts on hundreds of everyday products, including popular items such as Coca-Cola, Tim Tams biscuits, Colgate toothpaste, and Friskies cat food.

The ACCC claims that both companies raised prices temporarily on several products before offering them at a so-called "discount," which in reality was higher than the original price.

This deceptive pricing practice allegedly took place over a period of 20 months as part of Woolworths' "Prices Dropped" campaign and Coles' "Down, Down" promotions.

For example, Woolworths sold a 370-gram family pack of Oreo Original biscuits for AUD 3.50 for nearly two years.

However, the price was raised to AUD 5.00 for 22 days, after which the product was placed on promotion for AUD 4.50, making the "discounted" price 29% higher than the original cost.

The ACCC has stated that this kind of practice misleads the "ordinary and reasonable" consumer, who expects discounts to be genuine.

ACCC chair Gina Cass-Gottlieb emphasised that these deceptive actions occurred during a time when many Australians were already struggling with rising costs of living, especially food prices.

The pricing of Strepsils Throat Lozenges Honey & Lemon 16 pack saw notable changes between January 2021 and May 2023.

From at least 1 January 2021 until 11 October 2022, Coles sold the product at a regular price of AUD 5.50 as part of its ongoing 'Down Down' promotion for 649 days, with one brief seven-day special.

On 12 October 2022, the price was raised to AUD 7.00 for 28 days.

Then, on 9 November 2022, the product was again listed under the 'Down Down' promotion, showing a discounted price of AUD 6.00 with a "was" price of AUD 7.00.

However, the AUD 6.00 "discounted" price was actually 9% higher than the original regular price of AUD 5.50.

The ACCC claims that Coles deliberately increased the price temporarily to create a higher "was" price for the promotion.

Coles reportedly made this decision around 7 October 2022, after a supplier requested a price increase, removing the product from the 'Down Down' campaign, raising its price, and then reintroducing it under 'Down Down' four weeks later.

Not the First Time

This is not the first instance of such behaviour by major companies.

In 2020, online retailer Kogan was fined AUD 350,000 after the ACCC proved it had inflated prices before offering a "10% discount."

Similarly, insurance company IAG is also facing action for not delivering promised loyalty discounts to its customers, as they increased premiums just before applying the discount.

Penalties and Consequences:

The ACCC is seeking civil penalties against Coles and Woolworths, which could be substantial.

Penalties for misleading conduct have increased significantly since November 2022. Now, companies found guilty can face fines starting from AUD 50 million, potentially going up to 30% of the company’s turnover during the period of the violation.

In this case, each time customers were misled by false discounts, both supermarkets could face separate penalties for every contravention.

In addition to fines, the ACCC is also pushing for both supermarkets to contribute to charities that provide food to people in need.

Such penalties are aimed at ensuring companies do not see violations as merely a “cost of doing business.”

In May, Qantas agreed to pay AUD 100 million in penalties for selling tickets on flights that were already cancelled, showing that regulatory bodies in Australia are cracking down on misleading conduct by major corporations.

The lawsuits come at a time when food prices in Australia are continuing to rise due to high inflation, making consumers more reliant on discounts to manage their grocery expenses.

The ACCC’s actions are part of a broader effort to protect consumers and ensure businesses follow fair pricing practices.

Woolworths operates the largest supermarket chain in Australia, with approximately 1,140 stores nationwide.

The 'Prices Dropped' program, promoted by Woolworths, aims to provide customers with consistently lower prices for an extended period.

The goal of the program is to reduce the regular shelf price of products compared to their previous standard price.

Coles, Australia's second-largest supermarket chain, runs over 840 stores across the country.

In June 2010, Coles launched the 'Down Down' program, promoting it as a campaign aimed at lowering the regular shelf price of frequently bought items.

The initiative was intended to provide customers with consistent value on everyday products, helping reduce their overall shopping costs.