The Australian Competition and Consumer Commission (ACCC) has taken the supermarkets to court for misleading and deceptive practices, and the theoretical size of the punishment is colossal.
Coles and Woolworths raised prices of hundreds of products significantly but briefly, then dropped them slightly but permanently, and stuck stickers on those products saying the prices had been “dropped”. The ACCC’s legal action focuses on advertising price cuts. But the big-picture story is price hikes.
The size of the fine for misleading and deceptive conduct is up to $50 million per instance, defined as the number of times an individual was misled. The supermarkets stand accused of deceptive practice regarding 250 different items. Each would have been seen by millions of shoppers.
Hundreds of products, multiplied by millions of customers, multiplied by $50 million is greater than Australia’s GDP. Trillions of dollars. So essentially there is no legal maximum to the size of the fine.
The ACCC’s guidelines say that it often likes to ask for the maximum possible fine:
The statutory maximum is not reserved for the most serious examples of misconduct, and there may be circumstances in which although it may be possible to imagine a ‘worse case’, the ACCC considers a penalty close to, or at, the maximum is otherwise required for deterrence, and it will seek such a penalty in its submissions to the court.
But will the reality be that supermarkets are hit with a fine as limp as a lettuce leaf? Certainly they can afford some of the best legal representation money can buy. And there is some precedent for a light fine. Kogan paid a meagre $350,000 fine for similarly misleading prices in 2020. But whereas Kogan’s promotion ran over four days, Coles and Woolworths ran theirs for more than a year. The fines for misleading conduct have also been increased since then — we can expect the ACCC to seek a much larger fine in this case.
There remains the perception in some quarters that the ACCC is weak. This perception is contestable. The ACCC is not like the Environmental Protection Authority, which hands out $10,000 fines to $10 billion businesses. Neither is it timid like ASIC or APRA.
Following a joint investigation by the ACCC and AFP, a Federal Court put two company directors in jail a while ago for cartel conduct. And while misleading and deceptive conduct is not a criminal offence like cartel conduct, the ACCC still wants fines big enough to hurt.
“Penalties must be sufficiently high to deter repeat conduct and deter other business conduct, so they cannot be seen as just an acceptable ‘cost of doing business’,” Gina Cass-Gottlieb said in a landmark speech after her appointment as ACCC boss.
In recent times the ACCC has levied fines of $14 million to EnergyAustralia for misleading 566,000 customers over prices. In July a Federal Court ordered Master Wealth Control Pty Ltd to pay $5 million for misleading seminars on wealth, and in August issued a fine of $10.95 million to Secure Parking for misleading customers about parking after ACCC launched proceedings.
Those businesses are small fry compared to Coles and Woolworths, whose profits were $1.1 billion and $1.6 billion respectively last year. A $10 million or even $50 million fine would be seen as a “cost of doing business” for the big supermarkets. A fine well above those numbers is in order.
The PR battle
In any big trial that attracts public interest, a defendant can hope to draw on public sympathy. Except in this case.
In 2024 the social licence of the big supermarkets is utterly broken — their reputations befouled, their brands synonymous with impersonal corporate rapacity. This is an awful time for them to be attempting to mount a defence to a major charge.
Recently we have seen Woolworths chief executive Brad Banducci standing behind the counter at a Woolworths Metro, cosplaying at providing service to customers. But his appearance is an absurdity, far too late in his destructive reign to appear as anything more than a confession of previous errors.
The ability of the major supermarkets to marshall any sort of public goodwill is gone. When input prices rose and they could have shared the hard times with customers, they chose not to. Instead they maintained and even increased profits. That was nice for shareholders in the short term but was never going to be costless.
Federal Court judges apply the law. But the law depends on public perceptions of fairness, as the ACCC knows.
I’m going to share a quote from Chief Justice of the High Court Stephen Gageler, one of Australia’s senior jurists, that ACCC boss Cass-Gottlieb recently highlighted in a speech. It talks about the definition of “unconscionable conduct” and points out that what is unconscionable must depend on society’s values.
“For a court to pronounce conduct unconscionable is for the court to denounce that conduct as offensive to conscience informed by a sense of what is right and proper according to values that can be recognised by the courts to prevail with contemporary Australian society,” she quoted him.
Contemporary Australian society is not interested in giving the supermarkets an easy pass. In this case a tiny fine will not satisfy the public. The customers of Woolworths and Coles include Australia’s most vulnerable people. Perhaps some shoppers scoffed at the stickers Woolies put on certain products, but the law is there to protect everyone.
What happens next?
Cass-Gottlieb is not afraid to whack big businesses. Her whole career has been about that, previously as a top lawyer and now as ACCC boss. She boasts about the size of the fines (“enforcement outcomes”) they hand out and seems keen to ramp that number up.
“We recognise the importance of strong enforcement outcomes in achieving specific and general deterrence,” she said earlier this year. That’s lawyer-speak for “I want bigger fines”.
The court case will go through several stages. First a judge will be assigned. I don’t know all the particulars of the menu of Federal Court judges, but you’d imagine there are some the ACCC would rather avoid and some the supermarkets will be terrified of. The case has been filed in Victoria.
Then there will be a battle in court over liability. How hard will the supermarkets fight the claims? We will find out if they want a long and bloody court battle in a year where they are also enjoying a big ACCC inquiry.
Last we will have the part where the fine is decided. Only after the decision on liability does the judge decide on the figure. They can agree with the ACCC, and when both parties agree, the judge usually finds that compelling. Qantas did that recently, aligning with the ACCC and asking the court to fine it $100 million for selling tickets on cancelled flights.
Could the ACCC top $100 million in its battle with the supermarkets, or will the fines go down down? This will be one of the most significant consumer law cases of the decade and it will be fascinating to watch.
