The competition regulator has taken Coles and Woolworths to court over what is commonly known as “was/is” comparative pricing.
The allegations, which Coles said it would defend and Woolworths said it would review, could result in large fines and unravel the supermarkets’ well-known “Down Down” and “Prices Dropped” promotions, which are at the heart of their marketing campaigns.
This is how the promotions worked, according to the Australian Competition and Consumer Commission (ACCC), and why they allegedly breach consumer laws.
In court documents, the ACCC cited the example of a 16-pack of Strepsils honey and lemon throat lozenges sold at Coles.
It said that Coles offered the pack for $5.50 for all of 2021 and most of 2022 in its “Down Down” category, marked with a red sticker.
The supermarket increased the price to $7 for 28 days, which the regulator described as a “price spike”.
The Strepsils pack then went into another “Down Down” promotion at $6, advertising a “was” price of $7, when it was actually 9% higher than the long-term price of $5.50.
The ACCC claims that Coles had planned the temporary price spike to establish a new higher “was” price for the subsequent promotion after receiving a request from the supplier for a price increase.
This helped Coles, at a minimum, maintain its profit margin on a grocery item while keeping the products in its promotional category, according to the regulator.
A similar practice occurred on 245 products sold at Coles monitored by the ACCC, with the new promotional price almost always higher than the price charged before the spike.
This constitutes “misleading representations” according to the regulator and may have enticed consumers to purchase products based on false information.
“The false or misleading representations concerned the price of household staples at a time of increasing cost of living pressures, and were made in the context of a program which Coles specifically promoted as being designed to help consumers make long-term savings on the cost of their groceries,” the ACCC said.
The affected products at Coles included well-known brands like Arnott’s Shapes, Band-Aids, Bega cheese, Cadbury chocolates, Coca-Cola, Colgate toothpaste and Whiskas cat food.
The separate proceedings against Woolworths include nearly identical allegations affecting 266 products featured in its “Prices Dropped” promotion, including Arnott’s Tim Tams, Palmolive dishwashing liquid, Raid insect spray and Oreo cookies.
The court documents allege that Woolworths priced its 370g Oreo family pack at $3.50 from January 2021 to November 2022, before the price spiked to $5 for 22 days.
It was then returned to the “Prices Dropped” promotion for $4.50, which was 29% higher than its long-term regular price.
