“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,” the consumer watchdog CEO, Gina Cass-Gottlieb, said in a statement.

Between September 2021 and May 2023, there was an alleged 265 instances where Woolworths used its “Prices Dropped” campaign to sell products at a price higher than a regular price, and a further 11 instances where the promotional price was the same as the regular.

For Coles’ “Down Down” campaign between February 2022 and May 2023, the ACCC alleged there were 249 instances where the discount price was higher and six instances where it was the same.

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In addition to the allegedly misleading discount prices, Holding Redlich partner Joanne Jary and senior associate Caitlin Waldron explained the ACCC has claimed the strategies “diminished consumers’ ability to make informed choices”.

“These deceptive price representations, made during a time of increasing cost-of-living pressures, were part of a program aimed at helping consumers save on household staples but instead caused harm by misrepresenting the potential savings,” they said.

Multimillion-dollar fines and ‘significantly increased’ penalties

In its announcement, the ACCC said it seeks declarations, pecuniary penalties, non-punitive orders and costs from Coles and Woolworths, in addition to a community service order to ensure both fund a registered charity to deliver meals to Australians in need.

Jary and Waldron said the timing of the conduct alleged against the major retailers “straddled” the introduction of penalties under the Treasury Law Amendment (More Competition, Better Prices) Act 2022, which “significantly increased the maximum pecuniary penalties for certain contraventions of the Australian Consumer Law”.

For proven contraventions of the consumer law after 10 November 2022, they explained companies could be fined up to the greater sum of $50 million, or three times the value derived from the relevant breach, or – if the value cannot be determined – 30 per cent of the company’s turnover during the contravening period.

According to the ACCC’s concise statement, a separate contravention of consumer law exists for each time Coles and Woolworths allegedly made a representation to a consumer through their campaigns “about a product that was displayed at a price that was actually higher than, or equal to, its regular price prior to the spike during the period that the alleged conduct was said to occur”.

“The total number of contraventions is therefore equivalent to the number of times a consumer viewed a relevant ‘Down Down’ or ‘Prices Dropped’ ticket for an affected product during the relevant period,” Jary and Waldron told Lawyers Weekly.

“It may be inferred that this number is at least equal to the total number of consumers who purchased one of these products while it was promoted as being on ‘Down Down’ or ‘Prices Dropped’.”

While it will be a matter for the court to decide, Jary and Waldron said the case offered the consumer watchdog “the opportunity to potentially seek these new higher penalties that are now available for what the ACCC considers to be serious harm”.

The effect of it means consumer law breaches could “no longer be viewed as the cost of doing business, particularly given the potential reputational damage that can occur”, Jay and Waldron added.

These penalties were very much in effect when the ACCC secured a win against Qantas for $100 million in pecuniary penalties and $20 million in redress for advertising and selling tickets to flights that were cancelled and not notifying consumers of cancelled flights.

Unlike with Qantas, the ACCC is not seeking to establish a redress scheme, which Jay and Waldron said is most likely due to the difficulty of “establishing the consumers affected by the discounting”.

The power of the frustrated consumer

According to Jary and Waldron, this case has highlighted “the significant power” consumers have, “especially in the digital age”.

In her statement, Cass-Gottlieb said the consumer watchdog had received a number of complaints from frustrated consumers and noted the concerns across social media, which triggered their own investigation into the alleged misconduct.

“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,” Cass-Gottlieb said.

Jay and Waldron said social media can “quickly amplify concerns” and may force companies to address “overlooked issues”.

“It also serves as a reminder to major corporations that ignoring consumer concerns, even on social media, can lead to serious consequences, including investigations and enforcement action,” they said.

They added that given this alleged misconduct occurred during a cost-of-living crisis, and the particular sensitivities that come with that, retailers and major corporations must be vigilant if they want to maintain consumer trust and their reputation.

In Woolworths Group’s statement, CEO Amanda Bardwell noted this cost-of-living pressure but said the “Prices Dropped” campaign was introduced to provide customers with “great everyday value”.

Bardwell added the retailer is “committed” to finding new ways for customers to save at checkouts, “including thousands of weekly specials, everyday low prices on household essentials, a great value own brand range and through our Everyday Rewards program”.

“Companies need to be cautious about how they promote discounts and price reductions, as misleading claims can quickly erode trust and lead to regulatory action,” Jary and Waldron said.

“With increased ACCC scrutiny, companies should ensure their promotional strategies are transparent, avoid inflating prices before ‘discounts’, and consistently align their marketing with actual savings. Missteps in this environment may not only lead to legal or regulatory penalties but also damage retailers’ reputation in a competitive market where consumer loyalty is crucial.”

Staying on the ACCC’s good side

Not only should major retailers remain vigilant of their consumers’ trust, particularly in a cost-of-living crisis, but they must also keep an eye on pricing accuracy and consistency across social media platforms, in-store, and in their advertisements, Jary and Waldron said.

“The ACCC’s focus on ensuring consumer [protection] during a cost-of-living crisis signals that retailers will face increased scrutiny, not just from regulators but from the public as well, especially given the role of social media in amplifying consumer concerns,” they said.

To stay off the ACCC’s radar, Jary and Waldron said, retailers should start by ensuring their advertised price reductions or discounts are genuine – and that the advertised “discounted” price reflects “a legitimate reduction from the immediately preceding price for a reasonable period before the promotion”.

Retailers should also avoid increasing the price of products “immediately prior to a promotional period to create the impression of a discount where none exists”, Jay and Waldron added.

If prices have increased, retailers should clearly communicate promotions and pricing strategies to consumers and avoid “any ambiguity or misleading claims in advertising materials to prevent consumer confusion and ensure compliance” with consumer law.

As an additional step, Jay and Waldron said retailers should conduct regular audits of pricing strategies and promotions and establish internal policies to avoid “unintentional breaches”.

Finally, retailers must be mindful of what deceptive promotions can do to consumer’s trust and long-term business relationships.

“Beyond legal penalties, misleading pricing can cause significant reputational harm,” Jay and Waldron said.