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Australia’s consumer watchdog has sued the country’s two largest supermarket chains Coles and Woolworths over accusations that they engaged in “illusory” discounting on hundreds of products ranging from Tim Tam biscuits to cat food.
The Australian Competition and Consumer Commission launched the legal action on Monday after months of wider debate in the country about the power and influence of the retailers.
The ACCC alleged that the two supermarkets — which control about 65 per cent of Australia’s grocery market, according to a Treasury report this year — engaged in “misleading” practices related to discounts on goods between 2021 and 2023.
The watchdog said Coles and Woolworths advertised discounts on items that were sold at the same or sometimes higher price than the regular cost of the products. They did so by implementing “price spikes” of about 15 per cent on the goods for brief periods before offering them at a discount to the inflated price.
“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where,” said Gina Cass-Gottlieb, chair of the ACCC.
In one example, the ACCC said Woolworths offered an Oreo family pack for a regular price of A$3.50 (US$2.40) for at least a year until November 2022. That month, Woolworths increased the price of the Oreo pack to A$5.00 for 22 days before promoting it as “prices dropped” at a cost of $4.50 — “29 per cent higher than the product’s previous retail price of A$3.50,” said the ACCC.
Australia’s Prime Minister Anthony Albanese said the artificial discounting would be “completely unacceptable” if proven. “Customers don’t deserve to be treated as fools by the supermarkets,” he said at a press conference.
He added that the alleged behaviour could have added to Australia’s inflation problem. “When you’re charging more for products than you should, it of course has an inflationary impact by definition,” he said.
The Australian government on Monday also issued an update on its plan to introduce a mandatory code for the country’s largest food retailers that would give regulators the right to impose huge fines on the companies if they are found to have breached regulations around pricing.
The ACCC action will increase pressure on retailers, which have argued in recent months that they have absorbed higher input costs as inflation has soared.
Coles said it would defend itself during proceedings brought by the ACCC. In a statement, it said the regulator’s allegations covered a period of significant cost inflation, which triggered an increase in the retail price of products.
“Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price,” it said in a statement.
Woolworths said it would review the allegations. “Cost-of-living pressures remain a key issue for millions of Australians who shop with us every week,” said Amanda Bardwell, the recently appointed chief executive.
Coles and Woolworths shares both dropped about 3.5 per cent following the ACCC action.
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