The Competition Watchdog is taking Coles and Woolworths to court over alleged breaches of Australian Consumer Law.The Australian Competition & Consumer Commission (ACCC) has announced that it will be taking Coles and Woolworths to court over misleading claims about price reductions.
The ACCC, which is the competition watchdog as well as one of the enforcers of Australian Consumer Law, is alleging that both of the supermarket giants have broken the law by misleading customers with their respective ‘Down Down’ and ‘Prices Dropped’ programs.
Misleading claims
According to Australian Consumer Law, it is illegal for a business to make “a misleading overall impression among the audience about (for example) the price, value or quality of consumer goods or services”. The ACCC’s cases against Coles and Woolworths argue that the supermarket giants have done just that.
Both supermarket chains run pricing programs that advertise when a product is lower than a previously listed price and will remain at a lower price for a long period of time. Generally, these labels will show a product’s previously listed price (the ‘was’ price) and the new lower price. This is different from a ‘special’ in which prices are reduced, but only for a short time before they return to their normal price.
When customers see a ‘Down Down’ or ‘Price Dropped’ label, they’ll reasonably assume that the price has been recently reduced, and that they’re making a saving. However, for the more than 500 products identified by the ACCC across both Coles and Woolworths’ ranges, the prices had been raised sharply for a short period of time before the ‘Down Down’ and ‘Prices Dropped’ labels were added. The ‘was’ price is then listed as the briefly raised price, which makes the final discount look bigger.
For all of the products identified by the ACCC, the ‘Down Down’ and ‘Prices Dropped’ price was higher or the same than the price had been before the sharp increase.
For example, from 1 January 2021 until 27 November 2022, a 370g Oreo Family Pack could be purchased from Woolworths for $3.50. Then, on 28 November 2022, the price was increased by more than 40% to $5.00. on 20 December 2022, just 22 days later, the ‘Prices Dropped’ promotion was applied, and the same pack was priced at $4.50 with a ‘was’ price of $5.00.
According to the ACCC Chair, the ACCC alleges “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”.
What could happen?
While the ACCC is alleging that both supermarkets have done similar things, the two cases are separate and unrelated to each other. If Coles or Woolworths are found to have breached Australian Consumer Law and mislead customers and the public about the price or value of their products, then they will have to pay a penalty that may be more than $50 million.
The ACCC is also seeking community service orders that would force both Coles and Woolworths to fund a charity to deliver meals for people in need, on top of any charitable funding that the companies already provide.
Coles and Woolworths used to be among the most trusted brands for Australians. But amid a cost-of-living crisis when both companies have seen their profits increase, many people are likely hoping that the supermarket giants will get more than a slap on the wrist.
Coles in particular saw its popularity drop sharply earlier this year, going from Australia’s 5th most trusted brand in December 2023 to the 9th most distrusted brand in March 2024. Woolworths also saw a significant, though less severe drop in popularity. They went from the 2nd most trusted brand to the 34th most trusted. These drops in popularity were largely due to perceptions of “price gouging/tricky pricing” and a “focus on profits ahead of customers”.
The announcement from the ACCC lends some support to those perceptions, and it also reinforces research from the Australia Institute released last year which showed that corporate profits are a driver of inflation. In a 23 September 2024 media release, Greg Jericho, Chief Economist at the Australia Institute said that the ACCC’s announcement “reinforces our research that has shown the inflation that led to the Reserve Bank raising interest rates was caused overwhelmingly by companies abusing market power to raise prices”.
The Australian Competition & Consumer Commission (ACCC) has announced that it will be taking Coles and Woolworths to court over misleading claims about price reductions.
The ACCC, which is the competition watchdog as well as one of the enforcers of Australian Consumer Law, is alleging that both of the supermarket giants have broken the law by misleading customers with their respective ‘Down Down’ and ‘Prices Dropped’ programs.
Misleading claims
According to Australian Consumer Law, it is illegal for a business to make “a misleading overall impression among the audience about (for example) the price, value or quality of consumer goods or services”. The ACCC’s cases against Coles and Woolworths argue that the supermarket giants have done just that.
Both supermarket chains run pricing programs that advertise when a product is lower than a previously listed price and will remain at a lower price for a long period of time. Generally, these labels will show a product’s previously listed price (the ‘was’ price) and the new lower price. This is different from a ‘special’ in which prices are reduced, but only for a short time before they return to their normal price.
When customers see a ‘Down Down’ or ‘Price Dropped’ label, they’ll reasonably assume that the price has been recently reduced, and that they’re making a saving. However, for the more than 500 products identified by the ACCC across both Coles and Woolworths’ ranges, the prices had been raised sharply for a short period of time before the ‘Down Down’ and ‘Prices Dropped’ labels were added. The ‘was’ price is then listed as the briefly raised price, which makes the final discount look bigger.
For all of the products identified by the ACCC, the ‘Down Down’ and ‘Prices Dropped’ price was higher or the same than the price had been before the sharp increase.
For example, from 1 January 2021 until 27 November 2022, a 370g Oreo Family Pack could be purchased from Woolworths for $3.50. Then, on 28 November 2022, the price was increased by more than 40% to $5.00. on 20 December 2022, just 22 days later, the ‘Prices Dropped’ promotion was applied, and the same pack was priced at $4.50 with a ‘was’ price of $5.00.
According to the ACCC Chair, the ACCC alleges “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”.
What could happen?
While the ACCC is alleging that both supermarkets have done similar things, the two cases are separate and unrelated to each other. If Coles or Woolworths are found to have breached Australian Consumer Law and mislead customers and the public about the price or value of their products, then they will have to pay a penalty that may be more than $50 million.
The ACCC is also seeking community service orders that would force both Coles and Woolworths to fund a charity to deliver meals for people in need, on top of any charitable funding that the companies already provide.
Coles and Woolworths used to be among the most trusted brands for Australians. But amid a cost-of-living crisis when both companies have seen their profits increase, many people are likely hoping that the supermarket giants will get more than a slap on the wrist.
Coles in particular saw its popularity drop sharply earlier this year, going from Australia’s 5th most trusted brand in December 2023 to the 9th most distrusted brand in March 2024. Woolworths also saw a significant, though less severe drop in popularity. They went from the 2nd most trusted brand to the 34th most trusted. These drops in popularity were largely due to perceptions of “price gouging/tricky pricing” and a “focus on profits ahead of customers”.
The announcement from the ACCC lends some support to those perceptions, and it also reinforces research from the Australia Institute released last year which showed that corporate profits are a driver of inflation. In a 23 September 2024 media release, Greg Jericho, Chief Economist at the Australia Institute said that the ACCC’s announcement “reinforces our research that has shown the inflation that led to the Reserve Bank raising interest rates was caused overwhelmingly by companies abusing market power to raise prices”.
