Australia sues grocery giants Woolworths and Coles over 'manipulative' discounts Reuters
Byron Kaye, Ayushman Ojha
(Reuters) – Australia's consumer watchdog accused the country's two biggest supermarkets of misleading consumers about discounts on hundreds of products in lawsuits filed on Monday, intensifying pressure on the sector amid a cost-of-living crisis.
The legal action marks a major step against the supermarket giants, which have faced scrutiny from lawmakers and regulators for hitting consumers with high prices at a time when interest rates, housing costs and energy bills have also risen sharply.
In separate cases, the Australian Competition and Consumer Commission said Woolworths and Coles held prices on certain products unchanged for up to two years, then raised them to advertise that they would be on sale soon.
The target sale price was higher than the original price, the lawsuits said. Companies in some cases deliberately set prices with the goal of establishing a higher “actual” price, the suits say.
“The price discounts as they were raised were misleading because the discount was false,” the commission's chairperson, Gina Cass-Gottlieb, told the press, adding that it affected millions of units of products.
The commission said it was seeking unspecified fines but noted that the potential fine for breaching the consumer law is A$50 million, 30% of the profits at the time of the offense or three times the amount of the company's profits from the wrongdoing.
The penalty “should be high enough so that it is not a 'cost of doing business', to prevent them from this behavior in the future and to prevent all sellers from this behavior,” said Cass-Gottlieb.
Shares in Woolworths and Coles, which account for two-thirds of Australian grocery sales, fell 4 percent after the announcement.
Woolworths said in a statement they would review the commission's claims, while Coles said it would defend the case.
Jefferies analyst, Michael Simotas, said it is difficult to predict the outcome of the cases, but said the penalties could be large.
“We expect that this issue will add pressure to the opinion of consumers in supermarkets and continue the spread of irregular sales,” he said.
The current CEOs of both companies started after the trial's intended period, from September 2021 to May 2023. At a Senate hearing in April 2024, former Woolworths CEO Brad Banducci said shoppers would go elsewhere if his company engaged in price cuts.
The centre-left Labor government, which is due to go to the polls within a year, faced pressure from political opponents to introduce laws giving the regulator the power to break up supermarkets, but rejected the power to dissolve.
($1 = 1.4684 Australian dollars)
