Australia's Woolworths, Coles Sued Over Illusory Discounts; Shares Dip

(RTTNews) - Shares of Australian supermarket chains Woolworths Group Ltd. and Coles Group Ltd. were down more than 3 percent on Monday's trading after the country's consumer watchdog sued them over allegedly engaging in "illusory" discounting on hundreds of products.

The Australian Competition and Consumer Commission or ACCC said it has commenced separate proceedings in the Federal Court against Woolworths and Coles Supermarkets Australia Pty Ltd, a unit of Coles Group, for allegedly breaching the Australian Consumer Law by misleading consumers with "Prices Dropped' and "Down Down" claims.

The ACCC, which estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales, is seeking declarations, penalties, costs and other orders.

The agency noted that its allegations relate to products sold by each of Woolworths and Coles at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year.

The ACCC alleges that Woolworths and Coles offered certain products at a regular price for at least 180 days. They then increased the prices by at least 15 percent for a relatively short period of time, and subsequently placed it onto their "Prices Dropped" or "Down Down" program. However, these promotional prices were actually higher than, or the same as, the previous regular price.

Each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory, the regulator noted.

The ACCC alleged that the conduct involved 266 products for Woolworths at different times across 20 months between September 2021 and May 2023, and 245 products for Coles at different times across 15 months between February 2022 and May 2023.

ACCC Chair Gina Cass-Gottlieb said, "Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures. It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims."

In the lawsuit, the ACCC is also seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

The latest action comes as the regulator is investigating the Australian supermarket sector, pricing practices and the relationship between wholesale, farmgate and retail prices, as directed by the Treasurer in January 2024.

Responding to the lawsuit, Woolworths reportedly said it would review the allegations and Coles said it would defend itself during proceedings brought by the ACCC.

In Australia, Woolworths shares closed Monday's trading at A$33.79, down 3.40 percent, and Coles Group shares were settled at A$18.59, down 3.28 percent.