By Dalinee Bangaroo, Trade Mark Attorney/Solicitor and Matt Hansen, Partner

The Australian Competition and Consumer Commission (ACCC) has commenced separate proceedings in the Federal Court of Australia against the two biggest Australian grocery giants, Coles Supermarkets Australia Pty Ltd (Coles) and Woolworths Group Limited (Woolworths) alleging that they have been making false and/or misleading representations to consumers about the prices of hundreds of products. The ACCC alleges that for a period of two years, Coles and Woolworths have been selling numerous common supermarket products at regular prices for up to six months to a year, then inflating the prices by at least 15% for a brief period (following requests from their suppliers for a price increase) before dropping them again to advertise them in the Coles “Down, Down” and the Woolworths “Prices Dropped” promotional campaigns.

The alleged conduct

Coles and Woolworths pricing conduct was brought to the ACCC’s attention through consumer complaints made directly to the ACCC and via social media monitoring of platforms such as Reddit. The alleged conduct involved 245 products for Coles and 266 products for Woolworths. In response to the complaints, the ACCC initiated a thorough investigation using its enforcement powers into those conduct.

Following the ACCC’s review into Coles’ and Woolworths’ promotions, the ACCC discovered that the new ‘Down Down’ and ‘Prices Dropped’ promotional prices were actually higher than, or similar to the previous regular prices (i.e. before the temporary inflated price took effect). The ACCC alleges that in many cases, both supermarkets had deliberately inflated the prices temporarily to later place the products in their respective promotions applying the so-called discounts, and implemented price spike for the purpose of establishing a higher ‘was’ price.

The representations were made on ‘Down Down’ and ‘Prices Dropped’ pricing tickets displayed to consumers in-store on the shelves and online, with a ‘was’ price displayed showing what the price was during the short-term price spike and the date of that price.

According to the Australian consumer watchdog’s estimates, both Coles and Woolworths sold tens of millions of the affected products and derived significant revenue from those sales, at a time where cost of living pressures are soaring.

The ACCC is seeking relief from the Federal Court on the basis that Coles and Woolworths were in breach of sections 18 and 29(1)(i) of the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct and making false or misleading representations to consumers. The ACCC is seeking declarations, penalties, costs and other orders against both grocery retailers, including community service orders that Coles and Woolworths must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

Why is this case important?        

The issue that arose in the Coles’ and Woolworths’ cases is in relation to the retailers’ use of “Was/Now” pricing strategies. It is important to note that ‘Was/Now’ pricing can be a legitimate marketing strategy, however it is an area that is heavily scrutinised and regulated. It is therefore imperative that businesses ensure the claimed savings are not in fact illusory. Prices must be established for a reasonable period of time before being altered and advertised as legitimate discounts. Generally, if a product is offered at a price for a majority of time, the price at which that product was offered will be regarded as its established regular price. A temporary rise in price will not be enough to overcome the established regular price. In other words, businesses must avoid making false or misleading statements about prices by ensuring the pricing highlighted in any “Was/Now” marketing strategy is based off the usual retail prices of products, and the “Now” prices are therefore legitimate short-term savings on the usual retail price.

The ACCC insists that Australian consumers should be able to rely on the accuracy of pricing and discount claims. What does this mean is that consumers must be ale to make informed, unbiased decisions when purchasing and using products and services advertised by businesses.

The penalty

Big numbers are expected here!

For contraventions from 10 November 2022, the maximum penalty is the greater of:

• $50,000,000;
• if the Court can determine the value of the ‘reasonably attributable’ benefit obtained, three times that value; or
• if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30 per cent of the corporation’s adjusted turnover during the breach period.

Any affected consumer should note that any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings. The ACCC cannot foretell what penalties the Court may impose.

In parallel, the ACCC is not claiming any contravention of the ACL by any of Coles’ and Woolworths suppliers for the price spike in these proceedings.

Most importantly, the regulator is hopeful that this significant financial penalty will serve as deterrent to other retailers who are engaging in similar misleading conduct.

What does this mean for you?

If you are a retailer or if you otherwise offer goods or services to consumers, you must be aware that you are required to ensure you do not engage in activity that is misleading or deceptive, or that likely to mislead or deceive consumers. While the ACCC does not regulate supermarket prices, it enforces consumers rights and ensures fair trading for the benefit of all Australians. Engaging in marketing strategies such as the “Was/Now” pricing campaigns that have placed Coles and Woolworths in the ACCC’s crossfire must be undertaken with care, and you must ensure that the “was” price used in any sale activity is a legitimately established price that is offered on products most of the time.

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If you would like further information or advice on misleading representations in marketing or in relation to how to structure pricing campaigns, please contact one of our experts below.