Australia supermarkets Coles, Woolworths sued by regulator for misleading discounts

SYDNEY – Coles Group and Woolworths Group, Australia’s two biggest supermarket chains, have been sued by the country’s competition regulator over claims they misled shoppers over discounting claims on hundreds of common products. 

The Australian Competition and Consumer Commission (ACCC) alleged the companies briefly inflated prices on popular items such as Coca-Cola, Tim Tams biscuits and Colgate toothpaste before reducing them to the same or slightly higher than the original price.  

“The discounts were, in fact, illusory,” ACCC chairwoman Gina Cass-Gottlieb said in a statement on Sept 23.

“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost-of-living pressures. It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims,” she said. 

Australia has one of the world’s most concentrated supermarket sectors, with Woolworths and Coles controlling just over half of the market, according to Bloomberg Intelligence.

Both chains have come under political fire during the cost-of-living pressures sparked by stubbornly high inflation, with the government in June introducing larger fines for anti-competitive behaviour. 

“These are serious allegations that the ACCC is bringing before the courts,” Australian Prime Minister Anthony Albanese said on Sept 23. “If this is found to be true, it’s completely unacceptable. Customers don’t deserve to be treated as fools by the supermarkets.”

The latest inflation data for the June quarter showed the most significant contributors to prices were housing and food, including non-alcoholic beverages. The rise in food and non-alcoholic beverage prices was driven by fruit and vegetables, meals out and takeaway food, and meat and seafood, data from the Australia Bureau of Statistics showed.

Woolworths, whose Australian food sales rose 5.6 per cent to A$50.7 billion (S$44.7 billion) in the last fiscal year, said in a statement on Sept 23 that it will “carefully” review the ACCC’s claims.

Coles, whose supermarket sales gained 6.2 per cent to A$39 billion, said it intends to defend the proceedings. 

The ACCC has been taking a tougher stance on protecting Australian consumers, who must contend with duopolies or oligopolies in many industries, including air travel, banking and telecommunications.

Earlier in 2024, it won a A$100 million penalty from Qantas Airways for selling tickets on thousands of flights it had already decided to cancel. 

Oreo cookies 

The competition regulator alleges Woolworths made false or misleading representations about the prices of 266 products between September 2021 and May 2023, while Coles made false or misleading representations about the prices of 245 goods between February 2022 and May 2023. 

Ms Cass-Gottlieb said the allegations were “very serious”, and that the ACCC is worried both about the harm to consumers and the harm to competition by fake discounts. 

The allegations come as the ACCC undertakes a broader analysis of the supermarket sector. Ms Cass-Gottlieb added that the commission is looking in depth at competition, cost, pricing and margins.

“We encourage genuine discounts – they matter to consumers,” she told reporters on Sept 23. “But they need to be genuine.”

In one example cited, from at least Jan 1, 2021, until Nov 27, 2022, Woolworths offered Oreo Family Pack Original cookies for for a regular price of A$3.50 for at least 696 days.

On Nov 28, 2022, the price was increased to A$5 for 22 days. On Dec 20, 2022, the cookies were placed on a “Prices Dropped” promotion at a new price of A$4.50 and a “was” price of A$5. 

The “Prices Dropped” price of A$4.50 was in fact 29 per cent higher than the previous regular price, the regulator said.

The regulator also alleged that in many cases both companies “had already planned to later place the products on a ‘Prices Dropped’... promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher ‘was’ price”, Ms Cass-Gottlieb said. BLOOMBERG