There’s more than just the scalps of Australia’s two biggest retailers on the line if the Australian Competition and Consumer Commission (ACCC) proves Woolworths and Coles deliberately misled their customers on the pricing of more than 500 popular products for more than a year.
The two supermarket chains are business giants. On Monday Woolworths had a market value of $42.3 billion, while Coles was valued at nearly $25 billion. What the ACCC is alleging is simply a form of price gouging.
“The ACCC alleges that the supermarkets offered certain products at a regular price for at least 180 days. They then increased the price of the product by at least 15% for a relatively short period of time, and subsequently placed it onto their ‘Prices Dropped’ or ‘Down Down’ program,” the commission explained in its release on Monday.
“The ACCC alleges the display of the Prices Dropped and Down Down tickets was misleading, as the price of the products was in fact higher than or the same as the regular price at which the supermarket had previously offered the products for sale.”
The commission’s claims sound and read very much like price gouging, but also like an allegation of fraudulent behaviour on the part of the companies.
There’s a fine of up to $50 million per offence if proven in court, which means the stakes are enormous for the ACCC, the companies and all those who have denied price gouging happens.
If the commission proves its claims in court, then the list of individuals with egg on their face will be long. You can start at the Australian Financial Review, where former editors, editorial writers, economics writers and economist contributors have all written articles to “prove” there was no price gouging in this country.
But apart from the AFR, the organisation with perhaps the largest stain on its reputation is the Reserve Bank. In May 2023, the RBA rejected union claims about price gouging contributing to inflation, saying it found “little evidence” of the practice. But then in February of this year, governor Michele Bullock said some businesses are using the “cover” of high inflation and a lack of competition to push up prices. Sounds like an each-way bet.
There is another problem for the two retailers (and potentially for the ACCC if it doesn’t win its action), in that the statement on Monday lists a large number of branded products among the 511 allegedly implicated in the fake discounts. At Woolies these included Arnott’s Tim Tams, Kellogg’s cereal, Oreo cookies, Nicorette patches and Uncle Tobys muesli bars. At Coles these included Cadbury chocolates, Bega cheese, Rexona deodorant and Colgate toothpaste.
You have to wonder how some of the most powerful consumer goods companies in the world feel about their products being used in the alleged schemes of the two retailers.
Price discounts are usually financed by the manufacturer, supplier or distributor, with a little support from the retailer. They can be used to move slow-selling products, accelerate the sale of fast-selling goods, start new brands, keep volumes ticking over, and match price discounting by rivals.
What will be very interesting in this case is if the ACCC has investigated whether the suppliers of the products helped Woolies and Coles in their discounts.
This side of the ACCC’s allegations has the potential to take the story global.
