The stage is set for a legal stoush between supermarket giants Coles and Woolworths and the Australian Competition and Consumer Commission (ACCC), which has launched an action over accusations of misleading "price drop" promotions.
The ACCC alleges that both companies misled consumers through campaigns that appeared to offer discounts but were based on inflated prices, resulting in higher costs than the original prices before the promotional spikes.
Products still cost more than before
The action claims Coles and Woolworths used their "Down Down" and "Prices Dropped" campaigns to temporarily increase prices on hundreds of products before applying discounts, which misled shoppers into believing they were getting a better deal.
The watchdog alleges that despite the advertised price cuts, the products still cost more than they had before the price hikes.
Both supermarket chains have denied the allegations, arguing that the price increases were driven by rising supplier costs rather than any deliberate attempt to deceive customers.
Woolworths lawyer Cameron Moore SC refuted the ACCC's claims, stating that Woolworths did not initiate the price spikes and that the case against the company was "misconceived."
Coles lawyer John Sheahan KC echoed this defence, noting that the matter was more complex than the ACCC's accusations suggested and that any outcome could have significant implications for the entire retail sector.
The legal proceedings follow the ACCC’s September report highlighting widespread consumer dissatisfaction with rising prices and a perceived lack of competition in the supermarket sector, particularly as inflation puts pressure on household budgets.
Ongoing news flow
Coles and Woolworths, which control 67% of the Australian supermarket market, have come under increased scrutiny during the cost-of-living crisis.
The case is ongoing and promises negative newsflow for the grocery giants for some time, with both supermarkets required to submit a written response to the ACCC’s allegations by 29 November, ahead of a Federal Court case management hearing in December.
This legal action forms part of a broader investigation into pricing practices, including "shrinkflation," where products are reduced in size but sold at the same or higher prices.
The federal government has recently announced plans to tighten unit pricing rules to address this issue, which will place further pressure on the supermarket industry.