24 September 2024
5 min read
#Competition & Consumer Law, #Dispute Resolution & Litigation
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The Australian Competition and Consumer Commission (ACCC) has commenced separate proceedings in the Federal Court of Australia against Coles Supermarkets Australia Pty Ltd (Coles) and Woolworths Group Limited (Woolworths) for engaging in misleading or deceptive conduct, and making false and misleading representations in respect of their 'Down Down' and 'Prices Dropped' promotions, in breach of sections 18 and 29(1)(i) the Australian Consumer Law, Schedule 2 of the Competition and Consumer Act 2010 (Cth).
The ACCC alleges that between February 2022 and May 2023, Coles temporarily increased the prices of at least 245 different products before placing them on 'Down Down' promotions at prices which were either higher than or the same as its original sale price.
The ACCC alleges that Woolworths engaged in similar conduct between September 2021 and May 2023, by temporarily increasing the price of at least 266 different products before placing them on a 'Prices Dropped' promotion at prices which were higher than, or the same as, the price at which each product had originally been offered for sale prior to the temporary price spike.
It is alleged that in many cases, before the prices of the products were increased, both Coles and Woolworths allegedly planned to place the product on the 'Down Down' or 'Prices Dropped' promotions, so they could establish a higher 'was' price.
The ACCC alleges that the misleading claims about illusory discounts diminished consumers’ ability to make informed choices about what products to buy and from where, and highlighted the following as the alleged harm suffered by consumers:
“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 and Woolworths] specifically promoted as being designed to help consumers make long-term savings on the cost of their groceries. By [their] conduct, [Coles and Woolworths] diminished the ability of consumers to make informed choices about their essential purchases.”
The ACCC published examples of the alleged misleading conduct by both Coles and Woolworths. In Woolworths’s case, the below relates to the Oreo Family Pack advertised on a 'Prices Dropped' promotion:
It is alleged that Woolworths had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent promotion.
The ACCC also alleges that both supermarket chains made false or misleading representations about the prices of household staples during a period of rising living costs. These claims were part of promotions that each chain advertised as helping consumers save on groceries in the long run. However, these representations hindered consumers’ ability to make informed decisions about their essential purchases.
This action against Coles and Woolworths is also consistent with the ACCC’s published enforcement priorities, which includes pricing concerns in the supermarket sector with a focus on food and groceries.
The regulator is seeking declarations, pecuniary penalties, non-punitive orders and costs from both Coles and Woolworths for this conduct.
If the ACCC is successful in these proceedings, both Coles and Woolworths could face significant financial penalties. For contraventions that occurred after November 2022, Australian Consumer Law allows fines of up to the greater of $50 million or three times the value derived from the relevant breach, or, if the value derived from the breach cannot be determined, 30 per cent of the company’s turnover during the period it engaged in the conduct. The conduct alleged by the ACCC against Coles and Woolworths both straddle the introduction of these penalties.
This is not the ACCC’s first enforcement action in the space of illusory discounts. As recently as 2020, the ACCC was successful in bringing similar proceedings against Kogan Australia Pty Ltd for making false or misleading representations about tax time sales promotions. Similar to the current cases, Kogan increased its prices immediately before the promotion with consumers paying the same, or more than, what they had paid before or after the promotion.
Here are some practical tips for retailers to stay off the ACCC's enforcement radar and avoid falling into the trap of misleading promotions:
If you have any questions regarding this article or need legal assistance with your proposed advertisements and advertising campaigns, please get in touch with our team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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