Australia’s Competition Watchdog Takes Action Against Supermarkets

The Australian Competition and Consumer Commission (ACCC) has initiated court proceedings against supermarket giants Woolworths Ltd (ASX:WOW) and Coles Group (OTC:CLEGF) Ltd (ASX:COL) for allegedly misleading consumers over price discounts.

The ACCC claims that both companies falsely advertised discounts on “hundreds” of supermarket products by initially raising their prices before categorizing the items as discounted at pre-hike rates.

Woolworths employed this strategy through its “prices dropped” promotion, while Coles used a similar method under its “down down” promotion.

“…each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory,” said ACCC Chair Gina Cass-Gottlieb in a statement.

Following an investigation, the ACCC found that the two supermarkets violated consumer law regarding various ordinary items, such as chocolates, soft drinks, and household goods.

The total fines sought by the ACCC have not been disclosed, but the maximum penalty for each breach could exceed A$50 million ($34 million).

Coles responded, stating that the ACCC’s claims relate to a period of “significant cost inflation”, during which the firm encountered increased supplier prices. They plan to defend against the proceedings.

Woolworths acknowledged the ACCC’s lawsuit and intends to engage with the regulator regarding the allegations.

Both Woolworths and Coles have experienced declining earnings in recent years as Australian consumers have reduced spending due to high inflation and interest rates. This economic environment has made shoppers notably more budget-conscious.