Coles and Woolworths promised discounts for years. Now the ACCC claims they ‘misled’ customers with more than 500 products

Supermarket giants Woolworths and Coles have been accused of using their ‘Prices Dropped’ and ‘Reduced’ promotions to mislead Australian consumers.

The two companies are now being separately summoned to a federal court by the Australian Competition and Consumer Commission (ACCC).

The ACCC announced on Monday morning that it was taking legal action. Chair Gina Cass-Gottlieb said the organisation would seek “severe penalties” through the courts.

Here’s what we know about the allegations.

Supermarket prices rose ‘by at least 15 percent’

According to the ACCC, both supermarkets offered certain products at their normal price “for at least 180 days”.

The price of each product was then reportedly “increased by at least 15 percent over a relatively short period of time.”

“(Woolworths and Coles) subsequently added it to their ‘Prices Dropped’ or ‘Down Down’ programme,” the ACCC said in its statement.

“The ACCC alleged that the display of the reduced price and discounted tickets was misleading as the price of the products was in fact higher than or the same as the normal price (previously offered).”

Woolworths’ Prices Dropped campaign promised to help customers “spend less on their everyday essentials”.

In August, the supermarket issued a press release stating that discounts of up to 23 percent were being given on more than 450 products in-store and online.

Coles’ long-running Down Down marketing campaign first launched in 2010, offering similar discounts on popular items.

Ms Cass-Gottlieb said years of marketing campaigns meant Australians associated both promotions with lower prices.

According to the ACCC, these lower prices were “effectively an illusion”.

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“We also allege that in many cases Woolworths and Coles had already planned to offer the products as ‘Prices Reduced’ or ‘Reduced’ promotions later, before the prices went up,” Cass-Gottlieb said.

Woolworths’ Oreos family pack reportedly increased in price

Woolworths is accused of temporarily increasing the prices of at least 266 different products before launching its ‘Prices Reduced’ campaign.

The ACCC’s legal brief stated that the Reduced Prices programme was aimed at reducing standard prices over a longer period of time.

Products were typically in the program for a minimum of 12 weeks, but the ACCC said many of the affected products had been in the program for “six months or more.”

In 265 cases between September 2021 and May 2023, the price of a product was reportedly higher than its previous normal price before the product went on sale.

“There was a price increase of 45 days or less before the product was placed on the ‘Prices Reduced’ promotion, during which period the price … was at least 15 per cent higher than the normal price,” the ACCC said.

The affected products include Tim Tams, batteries, pet food, butter, nicotine patches, muesli bars, cleaning products and menstrual products.

A family pack of Oreos was reportedly sold for a “pre-existing price of $3.50 from January 1, 2021 to November 27, 2022, “at least 696 days” according to the ACCC.

“On 28 November 2022, the price of the product was increased to $5.00 for a period of 22 days,” the ACCC alleged.

“Woolworths had decided on or about 18 November 2022 to remove the product from the Price Dropped list, increase the price and then put the product back on the Price Dropped list three weeks later.”

Woolworths has said it will carefully investigate the claims and continue to engage with the ACCC about the matter.

The supermarket said in a statement to the ASX that it remains “committed to offering customers plenty of ways to save at the checkout”.

Coles reportedly increased the price of Strepsils lozenges

Coles has been faced with similar allegations by the ACCC, involving at least 245 different products.

In 249 cases, the Down Down price of an affected product was found to be higher than the previous normal price.

In another six cases, the discounted price was reportedly equal to the previous, regular price.

The ACCC noted that some products were reportedly placed on the Down Down program multiple times between February 2022 and May 2023.

Products suspected of being affected include plasters, soft drinks, toothpaste, animal feed, two-minute noodles, breakfast cereals, menstrual products, yoghurt and baby food.

A pack of 16 Strepsils Throat Lozenges Honey & Lemon was sold for the regular price of $5.50 during an existing Down Down promotion for “a period of at least 649 days” until October 11, 2022.

“On November 9, 2022, the product was again placed in a Down Down promotion, with tickets showing a Down Down price of $6.00 and a ‘wash’ price of $7.00.

“The Down Down price was 9 percent higher than the product’s previous regular price of $5.50.”

As with Woolworths, the ACCC alleged that Coles planned the temporary price strike “following a request from the supplier for a price increase” on or around October 7, 2022.

Coles said the allegations relate to “a period of significant cost inflation” during which the company faced “a large number of cost increases” from suppliers.

“In addition, Coles’ own costs increased, leading to an increase in the selling prices of many products,” a statement said.

“Coles sought to strike a balance between managing the impact of the cost price increases on selling prices and delivering value to customers by resuming promotional activities as soon as possible after the new promotional price was introduced.”

The company said it plans to defend the legal proceedings.

Supermarket giants now face fines, ‘community service’ and possible class action lawsuits

The ACCC has indicated that it will seek “statements, fines, costs and other orders”.

There will also be a request for ‘community service’, which means both supermarkets must fund a registered charity ‘to deliver meals to Australians in need’.

According to the company, customers would have made their decisions “based on incorrect or misleading information”.

“The relevant conduct occurred over an extended period of time and involved the largest player in a critical market for Australians,” the organisation said in its filing.

“The false or misleading representations related to the price of household products at a time when the cost of living was increasing.

“(They) were made in the context of a program that (Coles and Woolworths) specifically promoted as a program to help consumers save on their grocery costs in the long term.”

Ms Cass-Gottlieb calls the alleged behaviour equally serious.

She said there was also a possibility of class-action lawsuits as a result of the investigation.