Australia’s Supermarket Giants Accused of Misleading Discounts

By Byron Kaye and Ayushman Ojha

(Reuters) – Australia’s consumer watchdog has accused the country’s two largest supermarket chains, Woolworths and Coles, of misleading shoppers regarding discounts on hundreds of products. This lawsuit, filed on Monday, amplifies pressure on the sector amid a cost-of-living crisis.

The legal action represents a significant stance against these supermarket giants, who are already under scrutiny from lawmakers and regulators due to high prices at a time when interest rates, housing costs, and energy bills have sharply increased.

In separate lawsuits, the Australian Competition and Consumer Commission alleged that Woolworths and Coles maintained steady prices on certain products for up to two years, only to hike them just before advertising them as being on sale. The purported sale prices were allegedly higher than the original prices. In some cases, the companies intentionally increased prices to set a higher “was” price.

“The price discounts as promoted were misleading because the discount was illusory,” remarked Gina Cass-Gottlieb, chair of the commission, stating that this affected millions of units of products. The commission is pursuing unspecified penalties, noting that potential fines could reach A$50 million, 30% of turnover during the wrongdoing, or three times the benefit accrued from the actions.

Prime Minister Anthony Albanese acknowledged the situation during a press briefing, emphasizing that customers should not be treated poorly by supermarkets. Woolworths has stated it will review the commission’s claims, while Coles plans to defend itself against the suit.

The announcement caused shares of the two companies, which account for two-thirds of Australian grocery sales, to drop as much as 4%. Jefferies analyst Michael Simotas warned that the potential penalties could significantly impact the consumer perception of major supermarkets.

Both companies’ current CEOs began after the lawsuit’s relevant timeframe (September 2021 to May 2023). In an April 2024 senate hearing, Woolworths’ then-CEO Brad Banducci cautioned that customers would turn to competitors if his company were involved in price gouging.

On Monday, Albanese unveiled draft legislation aimed at creating a mandatory code of conduct for the grocery sector, which would impose millions in fines for violations. However, his center-left Labor government has ruled out granting the competition regulator authority to dismantle the supermarket chains.

($1 = 1.4684 Australian dollars)