More than 10 million Australians have struggled with the high cost of living this year, leading to more than 52% of survey respondents saying they’ve experienced mental and social challenges associated with financial stress, according to research by comparison site Finder.
As Australians struggle under the weight of high interest rates, uncertain geopolitics and the third highest household debt ratio amongst OECD countries – only Switzerland and Norway have us beat – the Australian Competition and Consumer Commission (ACCC) has turned its attention to supermarket price gouging.
The watchdog has levelled the finger at Australia’s oligopoly, Woolworths and Coles, for engaging in manipulative and deceptive pricing behaviour as well as limiting competition through anti-competitive practices.
Australians no longer trust supermarkets
“Oligopolistic market structures can limit incentives to compete vigorously on price,” ACCC deputy chair Mick Keogh said.
“We see Woolworths and Coles providing a broadly similar experience to customers through largely undifferentiated product ranges, pricing at similar levels and similar non-price offerings including loyalty programs.
“So far during this inquiry we have heard in detail about many aspects of Australia’s grocery markets.
“Increasing grocery prices are one key contributor to the rising cost of living and are front of mind for consumers, given how often people shop at supermarkets and how much of their incomes people spend there.”
While the ACCC believes food price growth has largely matched inflation in other goods and services (and has been lower than in most OECD countries), the regulator is still concerned about misleading practices and abuses of market power.
Together, Coles and Woolworths account for 67% of supermarket retail sales nationally.
Are prices really ‘down down’?
Proactive spoke with commercial and government law firm Holding Redlich partner Joanne Jary and senior associate Caitlin Waldron to gain a better understanding of the allegations.
“The ACCC alleges that Woolworths and Coles have engaged in misleading or deceptive conduct in contravention of section 18 of the Australian Consumer Law,” Jary and Waldron explained.
“The ACCC also alleges the two companies made false or misleading representations with respect to the price of goods or services in contravention of section 29(1)(i) of the Australian Consumer Law, in respect of their ‘Down Down’ and ‘Prices Dropped’ promotions.”
Holding Redlich point to two particular products to prove the point: Oreos sold by Woolworths and Strepsils throat lozenges sold by Coles.
From January 2021 to November 2022, Woolworths sold Oreos at a regular price of $3.50.
On November 28, 2022, the price was increased to $5 for a period of 22 days – a so-called “spike period”.
Using the spike period price as the new anchor, Woolworths then promoted its Oreos under the 'Prices Dropped' promotion for $4.50, effectively 29% higher than the original product price despite now being promoted as ‘on sale’.
Similarly, Coles were selling Strepsils for $5.50 for almost two years, before raising the price to $7 for 28 days and then placing it on the ‘Down Down’ promotion for $6, essentially 9% higher than the original price.
The ACCC points to 266 such incidents for Woolworths and 245 for Coles between September 2021 (Woolworths) or February 2022 (Coles), and May 2023.
“These alleged deceptive price representations, made during a time of increasing cost of living pressures, were part of a program aimed at helping consumers save on household staples, but instead caused harm by misrepresenting the potential savings,” Jary and Waldron explained.
What kind of penalties are on the table?
The ACCC’s 2022-2023 report reveals the regulator enforced $142.3 million in penalties, with $136.5 million of that coming from cases related to consumer and fair-trading issues.
In this case, the ACCC is seeking “declarations, pecuniary penalties, non-punitive orders and costs from both Coles and Woolworths for this conduct”.
“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,” says Jary and Waldron.
ACCC chair Gina Cass-Gottlieb has said: “This is serious conduct that is of great concern to us, that affected many consumers with millions of products sold, subject to this practice” and that the penalty needs to deter the supermarkets and other companies from doing it again.
An amendment to Treasury laws concerning competition and deceptive practices increased the maximum penalties for certain violations in November 2022.
According to Holding Redlich, Australian law allows fines of $50 million or three times the value derived from the relevant legal breach, whichever is greater.
If the value of the breach can’t be determined, the company can instead be penalised for 30% of its turnover during the period it engaged in said misconduct.
The ACCC investigation period straddles this new amendment, meaning only some of the breaches would fall under these more stringent penalties.
Either way, the penalties promise to be steep should the allegations be proven true.
“A successful enforcement action by the ACCC may lead to significant changes in corporate behaviour, especially in high-profile companies like Coles and Woolworths,” Jary and Waldron highlighted.
“Such enforcement action can serve as a deterrent, reinforcing the importance of compliance with consumer protection and competition laws.
“Companies may no longer view breaches as merely a cost of doing business, particularly given the reputational damage that can result from regulatory enforcement actions.
“The publicity around these cases may also compel corporations to reassess their practices, fearing similar consequences.”
What can consumers do?
So, how can you protect yourself from similar unscrupulous practices?
Unfortunately, it requires quite a bit of mental labour and a higher level of attention than most of us are willing to expend during the weekly grocery shop.
“Regularly checking prices can help consumers identify genuine sales and avoid being misled,” Holding Redlich suggests.
“It is also crucial to carefully read terms and conditions, including product labels and contracts.
“This includes paying attention to special offers, pricing details, and exclusions that could be misleading.”
The law firm highlighted that consumers have every right to ask retailers for clarification about promotions, pricing and product features, and that a reputable seller would have no problem providing clear answers.
“Checking trusted consumer review sites or social media for others’ experience can also help identify patterns of misleading practices,” Jary and Waldron pointed out.
“If a consumer encounters deceptive advertising or practices, report them to consumer protection agencies like the ACCC.
“This not only helps them but also protects other consumers.”
Ultimately, it will be up to the court to decide whether Coles and Woolworths breached Australian consumer law but during this period of heightened financial strain, it pays to pay attention.