ARTICLE
30 September 2024

Down, down… to court we go: Coles and Woolworths in hot water over 'price drops'

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Holding Redlich

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Holding Redlich, a national commercial law firm with offices in Melbourne, Canberra, Sydney, Brisbane, and Cairns, delivers tailored solutions with expert legal thinking and industry knowledge, prioritizing client partnerships.
Retailers to understand laws to stay off the ACCC's enforcement radar and avoid falling into the trap of misleading promotions.
Australia Antitrust/Competition Law

The Australian Competition and Consumer Commission (ACCC) has commenced separate proceedings in the Federal Court of Australia against Coles Supermarkets Australia Pty Ltd (Coles) and Woolworths Group Limited (Woolworths) for engaging in misleading or deceptive conduct, and making false and misleading representations in respect of their 'Down Down' and 'Prices Dropped' promotions, in breach of sections 18 and 29(1)(i) the Australian Consumer Law, Schedule 2 of the Competition and Consumer Act 2010 (Cth).

Background

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 which were either higher than or the same as its original sale price.

The ACCC alleges that Woolworths engaged in similar conduct between September 2021 and May 2023, by temporarily increasing the price of at least 266 different products before placing them on a 'Prices Dropped' promotion at prices which were higher than, or the same as, the price at which each product had originally been offered for sale prior to the temporary price spike.

It is alleged that in many cases, before the prices of the products were increased, both Coles and Woolworths allegedly planned to place the product on the 'Down Down' or 'Prices Dropped' promotions, so they could establish a higher 'was' price.

The ACCC alleges that the misleading claims about illusory discounts diminished consumers' ability to make informed choices about what products to buy and from where, and highlighted the following as the alleged harm suffered by consumers:

"The false or misleading representations concerned the price of household staples at a time of increasing cost of living pressures, and were made in the context of a program which [Coles and Woolworths] specifically promoted as being designed to help consumers make long-term savings on the cost of their groceries. By [their] conduct, [Coles and Woolworths] diminished the ability of consumers to make informed choices about their essential purchases."

The 'Oreo Family Pack'

The ACCC published examples of the alleged misleading conduct by both Coles and Woolworths. In Woolworths's case, the below relates to the Oreo Family Pack advertised on a 'Prices Dropped' promotion:

  • between approximately 1 January 2021 to 27 November 2022, Woolworths offered the Oreo Family Pack for sale at $3.50
  • on 28 November 2022, the price was increased to $5.00 for a period of 22 days
  • on 20 December 2022, the product was placed on a 'Prices Dropped' promotion to $4.50, with the 'was' price identified as $5.00
  • the 'Prices Dropped' price was actually 29 per cent higher than the product's regular price of $3.50.

It is alleged that Woolworths had planned the temporary price spike to establish a new higher 'was' price for the subsequent promotion.

The real 'price' to pay

The ACCC also alleges that both supermarket chains made false or misleading representations about the prices of household staples during a period of rising living costs. These claims were part of promotions that each chain advertised as helping consumers save on groceries in the long run. However, these representations hindered consumers' ability to make informed decisions about their essential purchases.

This action against Coles and Woolworths is also consistent with the ACCC's published enforcement priorities, which includes pricing concerns in the supermarket sector with a focus on food and groceries.

The regulator is seeking declarations, pecuniary penalties, non-punitive orders and costs from both Coles and Woolworths for this conduct.

If the ACCC is successful in these proceedings, both Coles and Woolworths could face significant financial penalties. For contraventions that occurred after 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. The conduct alleged by the ACCC against Coles and Woolworths both straddle the introduction of these penalties.

Kogan

This is not the ACCC's first enforcement action in the space of illusory discounts. As recently as 2020, the ACCC was successful in bringing similar proceedings against Kogan Australia Pty Ltd for making false or misleading representations about tax time sales promotions. Similar to the current cases, Kogan increased its prices immediately before the promotion with consumers paying the same, or more than, what they had paid before or after the promotion.

Tips for retailers to stay on the ACCC's good side

Here are some practical tips for retailers to stay off the ACCC's enforcement radar and avoid falling into the trap of misleading promotions:

  • ensure that any advertised price reductions or discounts are genuine. The advertised 'discounted' price should reflect a legitimate reduction from the immediately preceding price for a reasonable period before the promotion
  • avoid increasing the price of products prior to a promotional period to create the impression of a discount where none exists. Misleading or deceptive practices may breach the Australian Consumer Law and expose retailers to regulatory action by the ACCC
  • clearly communicate promotions and pricing strategies to consumers. Retailers should avoid any ambiguity or misleading claims in advertising materials to prevent consumer confusion and ensure compliance with the Australian Consumer Law
  • conduct regular audits of their pricing practices and promotions to ensure compliance. Establishing internal policies for promotional pricing will help avoid unintentional breaches
  • be mindful of the impact that deceptive promotions can have on consumer trust and long-term business relationships. Beyond legal penalties, misleading pricing can cause significant reputational harm.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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