ACCC takes on Coles and Woolworths

Coles and Woolworths have been working to keep consumers happy through the cost of living crisis, but the Australian Competition & Consumer Commission (ACCC) is alleging that the two supermarket giants were not actually providing a genuine discount or saving to consumers for some products marketed as “Down Down” or “Prices Dropped”. The ACCC has now commenced Federal Court proceedings in relation to the alleged false and misleading conduct, providing an important reminder for all retailers to exercise care when using was/now pricing.

The retailers are alleged to have introduced the “Down Down” (Coles) and “Prices Dropped” (Woolworths) promotions with the aim to give consumers access to discounted prices for a sustained period of time and reduce their overall shopping costs.

Throughout the years, consumers came to understand that the “Down Down” and “Prices Dropped” promotions related to a reduction to regular prices of supermarket products.

The ACCC alleges that the supermarkets artificially increased the price of products for a short period of time, before dropping the product back to either the same price as it was before, or, for the majority of alleged contraventions, to a price that was higher than the regular price. This new price point was then advertised to consumers under the “Down Down” and “Prices Dropped” promotions when the prices were in fact the same, or higher, than the regular price.

The allegedly artificially increased price was only in place for a very short period of time, being 45 days or less, as compared to the period in which the products were sold at the regular lower price, which was 180 days or more.

The alleged offending relates to approximately 250 products for each supermarket, and occurred over a period of 15 – 20 months.

By way of example (as also shown in the below graph):

• from 1 January 2021 until 27 November 2022 (696 days), Woolworths offered the Oreo Family Pack Original 370g product for sale (on a pre-existing “Prices Dropped” promotion) at a regular price of $3.50;
• on 28 November 2022, the price of the product was increased to $5.00 for a period of 22 days;
• on 20 December 2022, the product was then placed back on a “Prices Dropped” promotion with the tickets showing a “Prices Dropped” price of $4.50 and a ‘was’ price of $5.00. The “Prices Dropped” price of $4.50 was 29% higher than the product’s previous regular price of $3.50.

The increased price point is alleged to have been at least 15% higher than the regular price, and it is alleged that each of the supermarkets planned to place the products on a ‘“Down Down” or “Prices Dropped” promotion prior to the price spike and were implementing the spike for the purpose of establishing a higher ‘was’ price.

Products affected across both brands included common household brands such as TimTams, Dolmio sauces, Arnott’s Shapes biscuits, Bega cheese, Cadbury chocolates, Nescafe instant coffee and Sunrice rice.

The ACCC alleges this conduct diminished consumers’ ability to make informed decisions about which products to purchase and where to purchase them.

It has commenced proceedings in the Federal Court against each of Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd for alleged false and misleading conduct, in breach of the Australian Consumer Law (ACL).

The ACCC is seeking declarations, pecuniary penalties, non-punitive orders and costs, as well as seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need.

As explained in an earlier article, there have been significant increases to the penalties payable for contraventions of the ACL. As this increase to penalties occurred part way through the alleged conduct, it is not immediately clear which penalties will be applied if wrongdoing is found by the Court. Regardless, the penalties faced by the supermarkets could still be significant given the number of contraventions alleged.

Although it will be some time before there is an outcome in respect of these proceedings, the alleged conduct is a good reminder of how was/now pricing (also called strikethrough pricing or dual advertising) must be used to ensure that it does not contravene the ACL.

Criteria to consider in assessing whether was/now pricing may be false and misleading includes:

• was the “was” price in place for a reasonable period of time before the price drop? This assessment will vary in the circumstances of each case; there is no set period of time;
• timing of the “was price”. Ensure that the “was” price was in place immediately before the “now” price, and was not, for example, never sold at that price, or only sold at that price some time ago;
• are the savings between the two prices genuine? In the case of these proceedings, the allegedly artificially inflated price prior to the price drop suggests that there is no genuine saving for the consumer, and the conduct may therefore be false and misleading;
• are there sales where the product was actually sold at the original “was” price? The business should be able to demonstrate that relevant consumers would have bought the product at the “was” price. Having records of sales is one way to demonstrate that the was/now pricing is genuine.

The ACCC encourages businesses to keep records that show when, and for how long, an item has been offered for sale at various prices, and the prices that the business actually sold the item for. The ACCC can ask businesses to substantiate this type of information if it has concerns about compliance with the ACL.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.

Co-author

Name: Mia Doherty

Position: Law Clerk

Practice: Disputes