The Australian Competition and Consumer Commission (ACCC) has filed separate proceedings in the Federal Court of Australia against Woolworths Group Limited (Woolworths) (ASX: WOW) and Coles Supermarkets Australia (Coles) (a subsidiary of Coles Group Limited – ASX: COL).

The regulator is alleging that the supermarkets offered certain products at a regular price for at least 180 days, then increased the price of the product by at least 15 per cent for a relatively short period of time, and subsequently placed it onto their “Prices Dropped” or “Down Down” program.

The display of the “Prices Dropped” and “Down Down” tickets was misleading, the ACCC suggests, as the price of the products was in fact higher than or the same as the regular price at which the supermarket had previously offered the products for sale.

Woolworths allegedly undertook such action for 266 products for the 20 months between September 2021 and May 2023, while Coles allegedly acted in such ways 245 times across the 15 months between September 2021 and May 2023.

The supermarket giants – which have almost 2,000 stores between them across the country – have, according to an estimate by the regulator, sold tens of millions of the affected products and derived significant revenue from those sales.

The conduct by the supermarket giants is alleged to have occurred on myriad everyday items, including but not limited to biscuits, batteries, pasta sauces, multipurpose wipes, tampons, instant coffee, shampoo, throat lozenges, cereal, and muesli bars.

The ACCC highlighted, in a statement, that the proceedings being brought against Woolworths and Coles are separate, and no suggestion of collusion or anti-competitive conduct by the supermarket giants is being made as part of the respective proceedings.

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The ACCC is seeking declarations, penalties, costs, and other orders, including community service orders for the supermarket giants to fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

As per the amended Australian Consumer Law, the maximum penalty that can be imposed is $50 million, or three times the value of the reasonably attributable benefit obtained, or 30 per cent of the corporation’s adjusted turnover during the breach turnover period for the alleged contravention.

Speaking about the proceedings, ACCC chair Gina Cass-Gottlieb said: “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.

“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.”

The regulator further alleges, Cass-Gottlieb continued, that in many cases, “both Woolworths and Coles had already planned to later place the products on a ‘Prices Dropped’ or ‘Down Down’ promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher ‘was’ price”.

“Many consumers rely on discounts to help their grocery budgets stretch further,” Cass-Gottlieb said, “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.

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

In January 2024, the Treasurer directed the ACCC to conduct an inquiry into the Australian supermarket sector, pricing practices and the relationship between wholesale, farmgate and retail prices; however, the investigation into the conduct, which is the subject of these proceedings, pre-dates this inquiry.