Alleged supermarket pricing tactics ‘diminished consumers’ ability to make informed choices’

Here, we unpack the consumer regulator’s recent launching of legal proceedings in the Federal Court against supermarket giants Coles and Woolworths for allegedly misleading the Australian public through their pricing claims and the impact of the alleged conduct on consumers.

With Aussie workers already being financially kneecapped by the cost-of-living crisis, the last thing anyone asked for was alleged ethical malpractice from conglomerates that made record profits in the previous year.

Yet, as reported late last month, the Australian Competition and Consumer Commission (ACCC) has filed separate proceedings in the Federal Court of Australia against Woolworths Group Limited (Woolworths) (ASX: WOW) and Coles Supermarkets Australia (Coles) (a subsidiary of Coles Group Limited – ASX: COL).

The regulator alleged that the supermarkets offered certain products at a regular price for at least 180 days, then increased the price of the product by at least 15 per cent for a relatively short period, and subsequently placed it onto their “Prices Dropped” or “Down Down” program.

Holding Redlich partner Joanne Jary and senior associate Caitlin Waldron shared some insight into how this situation played out, and they gave some background on the alleged contraventions that Cole and Woolworths perpetuated.

“The ACCC alleges that between February 2022 and May 2023, Coles temporarily increased the prices of at least 245 different products before placing them on Down Down promotions at prices either higher than or equal to [their] original sale price,” Jary and Waldron said

“Woolworths has also faced allegations from the ACCC for engaging in similar conduct between September 2021 and May 2023 by temporarily raising the prices of at least 266 different products before placing them on its Prices Dropped promotion. The prices were either higher than or the same as their original sale prices prior to the increase.”

The ACCC further alleged that the conglomerates used the cost-of-living crisis as a depictive price incentive aimed at helping Aussies save on household staples but instead caused harm by losing them these potential savings.

“The ACCC alleges that the misleading claims made by the two supermarket chains diminished consumers’ ability to make informed choices about essential purchases,” Jary and Waldron said.

“These deceptive price representations, made during a time of increasing cost-of-living pressures, were part of a program aimed at helping consumers save on household staples, but instead caused harm by misrepresenting the potential savings.”

Workers across Australia are constantly scrambling to make ends meet as the cost-of-living crisis continues to debilitate them both mentally and financially. A recent report by Amwell found that 67 per cent of Australian workers experience symptoms of anxiety and depression. Respondents said increased work stress and the rising cost of living were contributing to their poor mental health.

With this in mind, these allegations are even more disturbing as it seems these conglomerates somewhat preyed on the desperation being exerted by Aussie consumers and workers.

“During a period of rising living costs, the ACCC also alleges that both supermarket chains made false or misleading representations about the prices of household staples,” Jary and Waldron said.

“These claims were part of promotions that each chain advertised as helping consumers save on groceries in the long run, but instead, these representations hindered consumers’ ability to make informed decisions about their essential purchases.”

Coles and Woolworths may face significant financial penalties if these allegations are found to be true. The ACCC is seeking declarations, pecuniary penalties, non-punitive orders, and costs from both Coles and Woolworths in payment for these allegations.

“From November 2022, Australian Consumer Law allows fines of up to the greater of $50 million or three times the value derived from the relevant breach, or, if the value derived from the breach cannot be determined, 30 per cent of the company’s turnover during the period it engaged in the conduct,” Jary and Waldron said.

“The conduct alleged by the ACCC against Coles and Woolworths both straddle the introduction of these penalties.”