Coles and Woolworths accused of worsening inflation as ACCC sues over discounts
Anthony Albanese has renewed his criticism of Coles and Woolies after new revelations they misled consumers about discounts. Photo: TND
Coles and Woolworths are being accused of making inflation worse after the ACCC sued both companies over allegations they made thousands of misleading claims about their discounts.
Prime Minister Anthony Albanese renewed his criticism of major supermarkets on Monday, responding to the revelations by reiterating that they raised prices “more than they should”.
He also implied that price increases contributed to the severity of RBA interest rate rises.
“It, of course, has an inflationary impact by definition, and we know that inflation is what the Reserve Bank is concentrating on in terms of monetary policy [interest rates],” Albanese said.
The ACCC alleged on Monday that Coles and Woolworths misled Australians between 2021 and 2023 about their “Prices Dropped” and “Down Down” advertising.
The case claims products were discounted soon after prices were hiked, resulting in “illusory” savings, but doesn’t include allegations about price gouging or wider inflationary pressures.
Australia Institute chief economist Greg Jericho said grocery prices rose sharply during that time and the ACCC case shows that supermarkets were making dodgy claims about the price hikes.
“Companies took advantage of that period of high inflation to raise prices by more than they should,” he said.
Previous Australia Institute research has linked high inflation in recent years to higher corporate profits, though its findings and methodology have been widely contested by economists.
An inquiry conducted for the ACTU by former ACCC boss Allan Fels has separately accused the major supermarkets of price gouging by raising prices above cost increases.
Jericho said the ACCC is limited in how it can crack down on supermarkets under current laws and that a separate pricing commission is needed to boost transparency for Australian families.
The ACCC does not regulate supermarket prices or price gouging itself, saying on its website that “price increases which people may think are too high are not illegal on their own”.
A commission could investigate how firms set prices and determine whether it’s fair, Jericho said, with the option for penalties if companies are caught pushing up costs to drive their profits.
“At the very least we need to be able to give much faster and more transparent information to people about prices,” Jericho said.
“What this case really shows is just how difficult this is for consumers.”
Supermarkets sued
The ACCC stressed on Monday that its case against Coles and Woolworths related specifically to misleading claims the companies made about their discount schemes, not food inflation itself.
The case claims the supermarkets offered products at a regular price for at least six months before increasing the price by at least 15 per cent for a “relatively short period of time”.
They then put those products onto their “Prices Dropped” and “Down Down” discount schemes, claiming the items were on sale when in fact they were still more expensive than previously.
“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,” ACCC chair Gina Cass-Gottlieb said in a statement.
“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.”
University of Technology Sydney associate professor Sanjoy Paul said the case demonstrates how supermarkets often provide “partial and misleading information” about prices to shoppers.
“Supermarkets are discounting products by raising prices beforehand,” he explained.
“People buy those products without looking at the previous price … they’re being misled.”
Choice director of campaigns Rosie Thomas said extensive research shows supermarket price labels often “confuse shoppers” who find it difficult to tell if a discount is genuine or not.
“We’re calling for greater transparency of historical supermarket pricing data,” Thomas said.
“Easier access to data on supermarket price changes over time would have made it much harder for the supermarkets to get away with this kind of behaviour for so long.”
In one example highlighted by the ACCC, Coles increased the price of Strepsils Throat Lozenges from $5.50 to $7 in 2022 after the price had remained the same for 649 days.
The price stayed the same for 28 days and then was placed on Coles’ Down Down program that dropped the price to $6 and claimed the ‘was’ price was $7, not the long-standing $5.50 price tag.
Coles had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’,” the ACCC said.
“Coles had decided (after a request from the supplier for a price increase) on or around 7 October 2022 to take the product off ‘Down Down’, increase the price, and then put the product back on to ‘Down Down’ four weeks later.”
Source: ACCC
In another example, Woolworths increased the price of its Oreo family packs from $3.50 (what it had cost for at least 696 days) to $5 in November 2022.
But 22 days later the Oreos were placed on its ‘Prices Dropped’ promotion and were repriced to $4.50, listing a ‘was’ price on the ticket of $5, not the long-standing $3.50 price.
“Woolworths had decided (after a request from the supplier for a price increase) on or around 18 November 2022 to take the product off ‘Prices Dropped’, increase the price, and then put the product back on to ‘Prices Dropped’ three weeks later,” the ACCC said.
Source: ACCC.
Woolworths said in a statement on Monday that it was considering the ACCC allegations, while Coles responded by saying it will defend the case.