In a major move against Australia’s supermarket giants, the country’s consumer watchdog, the Australian Competition and Consumer Commission (ACCC), has filed lawsuits against Woolworths and Coles, accusing them of misleading shoppers about discounts on hundreds of products. The lawsuits come at a time when Australians are struggling with a cost-of-living crisis, facing rising interest rates, housing costs, and energy bills.
The ACCC alleges that both Woolworths and Coles held prices steady on certain products for up to two years before increasing them and then advertising them as being on sale. The ‘sale’ prices, however, were actually higher than the original prices, according to the lawsuits. The commission claims that in some cases, the companies intentionally raised prices to establish a higher ‘was’ price, making the discounts seem more significant than they were.
“The price discounts as promoted were misleading because the discount was illusory,” said Gina Cass-Gottlieb, the ACCC’s chair, to reporters. She added that the misleading practices affected millions of units of products. The ACCC is seeking unspecified penalties but noted that potential fines for breaches of consumer law could reach A$50 million, 30% of turnover over the period of wrongdoing, or three times the amount the company benefited from the wrongdoing. Cass-Gottlieb emphasized that the penalty “has to be high enough to be not a ‘cost of doing business’, to deter them from this conduct in the future and deter all retailers from this manner of conduct”.
The lawsuits have been met with swift reactions. Prime Minister Anthony Albanese, who has faced pressure to address rising grocery prices and is facing an election within a year, stated that the actions alleged by the regulator would be unacceptable if true. “Customers don’t deserve to be treated as fools by the supermarkets,” he said to reporters.
In response to the lawsuits, Woolworths said they would review the ACCC’s claims, while Coles said they would defend the case. Shares of the two companies, which together control two-thirds of Australian grocery sales, fell as much as 4% after the announcement.
Michael Simotas, an analyst at Jefferies, noted that it was difficult to predict the outcome of the cases but suggested that the penalties could be significant. “We expect this matter to add to the pressure on major supermarkets’ consumer perception and continue to be compounded by sales leakage to non-traditional channels,” he said.
It’s important to note that the current CEOs of both companies started after the period targeted by the lawsuit, September 2021 to May 2023. In an April 2024 senate hearing, Woolworths’ then-CEO Brad Banducci stated that shoppers would go elsewhere if his company engaged in price gouging.
In response to the situation, Albanese announced draft legislation to impose a mandatory code of conduct for the grocery sector with millions of dollars in fines for breaches. His centre-left Labor government, however, has ruled out giving the competition regulator the power to break up the supermarket companies. The impact of these lawsuits and the potential changes to the grocery sector remain to be seen, but they highlight the growing concerns about the cost of living and the role of major corporations in shaping it.
