The Australian Competition and Consumer Commission (ACCC) is taking retail giants Woolworths Group and Coles Supermarkets Australia to the Federal Court over alleged misleading consumer claims for their respective ‘Prices dropped’ and ‘Down Down’ marketing programs.

The regulatory watchdog today confirmed it’s commenced separate proceedings in the Federal Court against Woolworths Group and Coles Supermarkets Australia for allegedly breaching the Australian Consumer Law by misleading consumers through discount pricing claims on hundreds of common supermarket products. The ACCC's allegations relate to products sold by each of Woolworths and Coles at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year.

According to the ACCC, the products were then subject to price rises of at least 15 per cent for brief periods, before being placed in Woolworths' 'Prices Dropped' promotion and Coles' 'Down Down' promotion, at prices lower than during the price spike but higher than, or the same as, the regular price that applied before the price spike. In its submission, the ACCC has accused both retailers of "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," ACCC Chair Gina Cass-Gottlieb said.

"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 ACCC is also alleging 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.

The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months between September 2021 and May 2023, and 245 products for Coles at different times between February 2022 and May 2023. The list of products covers everything from Tim Tams to ocean trout, Oreos, Vapodrops and Palmolive dishwashing liquid.

The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually with a 'was' price displayed showing what the price was during the short-term price spike and the date of that price. The ACCC identified this conduct through consumer contacts to the ACCC and social media monitoring, and then conducted an in-depth investigation using its compulsory powers.

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

According to ACCC estimates, Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales. The ACCC is seeking declarations, penalties, costs and other orders. The ACCC is also seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

As an example, the ACCC said from at least 1 January 2021 until 27 November 2022, Woolworths offered the Oreo Family Pack Original 370g product for sale at a regular price of $3.50 on a pre-existing 'Prices Dropped' promotion for at least 696 days. On 28 November 2022, the price was increased to $5.00 for a period of 22 days. On 20 December 2022, the product was placed on a 'Prices Dropped' promotion with the tickets showing a 'Prices Dropped' price of $4.50 and a 'was' price of $5.00. The 'Prices Dropped' price of $4.50 was in fact 29 per cent higher than the product's previous regular price of $3.50. In this example, the ACCC alleges Woolworths had planned the temporary price spike to establish a new higher 'was' price for the subsequent 'promotion'.

Meanwhile at Coles, from at least 1 January 2021 until 11 October 2022, Coles offered the Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale at a regular price of $5.50 (on a pre-existing 'Down Down' promotion) for at least 649 days, including one seven-day short-term special. On 12 October 2022, the price was then increased to $7.00 for a period of 28 days. On 9 November 2022, the product was placed on a 'Down Down' promotion with the tickets showing a 'Down Down' price of $6.00 and a 'was' price of $7.00. The 'Down Down' price of $6.00 was in fact 9 per cent higher than the product's previous regular price of $5.50. In this example, the ACCC alleges Coles had planned the temporary price spike to establish a new higher 'was' price for the subsequent 'promotion'.

The ACCC proceedings are being pursued as alleged breaches of the Australian Consumer Law, which provides that businesses must not make false or misleading statements about prices. It comes as the regulatory watchdog pursues a 12-month inquiry in supermarket pricing on behalf of the Federal Government.

The maximum penalty for each breach of the Australian Consumer Law 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 turnover period for the contravention.

Separate to these proceedings, in December 2023, following a complaint by Choice and an investigation by the ACCC, Coles announced refunds for thousands of customers after it raised the price on 20 products that it had promised would remain 'locked' for a certain period of time as part of Coles' 'Dropped and Locked' promotion.

Woolworths Group acknowledged the announcement and said it would carefully review the claims made by the ACCC.

“Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week. Our customers are telling us they want us to work even harder to deliver meaningful value to them and it’s important they can trust the value they see when shopping our stores," said Woolworths Group CEO, Amanda Bardwell. “Our Prices Dropped program was introduced to provide our customers with great everyday value on their favourite products."

Coles said it will defend against the proceedings, blaming inflation for a large number of cost price increases from suppliers as well as operational cost rises.

"Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price," it stated.