Rotten Deals? ACCC Serves Up Legal Action on Woolies and Coles

On 23 September 2024 the Australian Competition and Consumer Commission (ACCC) announced it had initiated separate legal proceedings against Australia’s two largest supermarket chains, Woolworths Group Limited (Woolworths) and Coles Supermarkets Australia Pty Ltd (Coles) in the Federal Court of Australia.

The ACCC alleges that both retailers engaged in misleading conduct regarding their discount pricing, specifically their respective “Prices Dropped” and “Down Down” promotions (together, the Promotions), in breach of the Australian Consumer Law (ACL).

Background

The ACCC’s allegations focus on the discount pricing strategies employed by Woolworths and Coles. According to the ACCC, both companies increased the prices of certain products by at least 15% for brief periods before including them in their Promotions. These Promotions suggested a price reduction, but the new prices were often higher than or the same as the regular prices before the temporary price spike.

Between September 2021 and May 2023, it is alleged that Woolworths temporarily increased the prices of at least 266 different products before placing them under their “Prices Dropped” promotions. Similarly, the ACCC alleges that Coles increased the prices of at least 245 products between February 2022 and May 2023 before including them in its “Down Down” promotions.

The Australian Consumer Law

The ACCC’s proceedings are brought under the provisions of the ACL which prohibit misleading or deceptive conduct (section 18 of the ACL), and the making of false or misleading representations with respect to the price of goods (section 29(1)(i) of the ACL).

In particular, the ACC alleges:

• misleading price claims: the Promotions misled consumers into believing they were receiving a genuine discount, when in fact the discounts were illusory;
• pre-planned price spikes: both companies had pre-planned the price spikes to create a higher “was” price, making the subsequent promotional prices appear more attractive; and
• consumer impact: these practices diminished consumers’ ability to make informed purchasing decisions, particularly during a time of cost-of-living pressures.

If either company is found to have contravened the ACL, along with suffering reputational damage they may incur significant financial penalties. In November 2022 (during the investigation period for the proceedings) the penalties for breaching the ACL were increased, with maximum penalties for corporations rising to the greater of:

• $50 million;
• three times the value of the benefit obtained from the breach; or
• 30% of the company’s adjusted turnover during the breach period.

These changes took effect on 10 November 2022.

Notably, the ACCC is alleging that each representation made under the Promotions during the relevant period constituted a separate contravention of the ACL. In other words, the ACCC contends that each individual consumer purchase under the Promotions is a separate breach.

Key take-aways

• This action by the ACCC underscores the importance of businesses adopting transparent pricing strategies.
• Businesses should review their promotional pricing practices and ensure they accurately represent a genuine discount to consumers.
• Misleading consumers through deceptive pricing practices can lead to significant legal consequences, including increasingly high financial penalties, as well as reputational damage.
• The ACCC have flagged pricing concerns both in the Supermarket sector and as a key enforcement and compliance priority for 2024-25. We expect to see more enforcement and compliance activity in the sector from the regulator on the horizon. Interestingly, the ACCC’s proceedings against Woolworths and Coles are not related to the ACCC’s broader inquiry into the Australian supermarket sector directed by the Treasurer in January this year.