Coles, Woolies made ‘millions’ from ‘illusory’ discounts: ACCC

The watchdog claims each supermarket inflated the prices on these products by at least 15 per cent for brief periods after purchase prices had remained steady for at least six months to over a year.

After this brief price increase, the products would then be placed in the supermarket chains’ respective ongoing discount promotions – “Prices Dropped” for Woolworths and “Down Down” for Coles, the ACCC alleges.

The watchdog said this meant the “discounted” prices were lower than the price spike, but higher than or equal to the long-running price before the inflation.

Speaking to media this morning, ACCC chair Gina Cass-Gottlieb claimed the supermarkets had sold millions of items subject to this pricing, for “millions of dollars in revenue”.

Cass-Gottlieb said the ACCC had been contacted by consumers about the issue before turning to social media, where “hundreds of consumers on X, Reddit, and Tiktok,” were reporting discounts they did not think were genuine.

“Following many years of marketing campaigns by Woolworths and Coles, Australian consumers have come to understand that the ‘Prices Dropped’ and ‘Down Down’ promotions relate to a sustained reduction in the regular prices of supermarket products,” Cass-Gottlieb said.

“However, in the case of these products, we allege the new ‘Prices Dropped’ and ‘Down Down’ promotional prices were actually higher than, or the same as, the previous regular price.

“We allege that each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory.”

She said the ACCC also alleged the inclusion of the products on the discount promotions was planned before the price spikes were applied.

The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months from September 2021 to May 2023.

The allegedly affected products included Arnott’s Tim Tams biscuits, Dolmio sauces, Doritos salsa, Energizer batteries, Friskies cat food, Kellogg’s cereal, President butter, Listerine mouthwash, Moccona coffee capsules, Mother energy drinks, Mr Chen’s noodles, Nicorette patches, Ocean Blue smoked salmon, Oreo cookies, Palmolive dishwashing liquid, Raid insect spray, Sprite soft drink, Stayfree pads, Twisties, Uncle Tobys muesli bars, and Vicks VapoDrops.

From at least January 1, 2021 until November 27, 2022, the ACCC claimed, Woolworths offered the Oreo Family Pack Original 370g product for sale at a regular price of $3.50 on a pre-existing “Prices Dropped” promotion for at least 696 days.

On November 28, 2022, the price was increased to $5 for a period of 22 days.

On December 20, 2022, the product was placed 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 thus 29 per cent higher than the product’s previous regular price of $3.50, the ACCC said.

The watchdog claimed that Coles’ conduct involved 245 products across 15 months from February 2022 to May 2023.

Products allegedly included Arnott’s Shapes biscuits, Band-Aids, Bega cheese, Cadbury chocolates, Coca-Cola soft drink, Colgate toothpaste, Danone yoghurt, Dettol multi-purpose wipes, Fab laundry liquid, Karicare formula, Kellogg’s snack bars, Kleenex tissues, Libra tampons, Lurpak butter, Maggi two-minute noodles, Nature’s Gift dog food, Nescafe instant coffee, Palmolive shampoo, Rexona deodorant, Sakata rice crackers, Sanitarium Weet-Bix cereal, Strepsils lozenges, Sunrice rice, Tena pads, Viva paper towels, Whiskas cat food, and Zafarelli pasta.

From at least January 1, 2021 until October 11, 2022, Coles offered the Strepsils Throat Lozenges Honey and Lemon 16 pack product for sale at a regular price of $5.50 (on a pre-existing “Down Down” promotion) for at least 649 days, including one seven-day short-term special, the ACCC said.

On October 12, 2022, the price was then allegedly increased to $7 for a period of 28 days.

On November 9, 2022, the ACCC claims the product was placed on a “Down Down” promotion with the tickets showing a “Down Down” price of $6 and a ‘was’ price of $7.

“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures,” Cass-Gottlieb said.

“It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims.

“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”

The ACCC alleged that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.

The watchdog is seeking declarations, penalties, costs and other orders in court, as well as community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

Cass-Gottlieb did not put a dollar figure on what penalties the ACCC would seek, saying the allegations first needed to satisfy the court.

But she said the sought penalty would be “significant” in both cases, if the allegations were sustained.

In a release, Woolworths said it acknowledged the announcement by the ACCC and would continue to engage with the watchdog on the issue.

“Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week,” Woolworths CEO Amanda Bardwell said.

“Our customers are telling us they want us to work even harder to deliver meaningful value to them and it’s important they can trust the value they see when shopping our stores.

“Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products.”

In a release, Coles said it intended to defend the court proceedings.

“The allegations relate to a period of significant cost inflation when Coles was receiving a large number of cost price increases from our suppliers and, in addition, Coles’ own costs were rising, which led to an increase in the retail price of many products,” the release read.

“Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price.

“In line with our values, Coles takes compliance with the Australian Consumer Law extremely seriously, and places great emphasis on building trust with all stakeholders, especially our customers.”