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Coles Group Ltd (ASX:COL) and Woolworths Group Ltd (ASX:WOW) are facing significant legal challenges as the Australian Competition & Consumer Commission (ACCC) initiates separate court proceedings against the two major retailers. The ACCC alleges that both companies have made misleading claims regarding their promotional pricing, specifically under the banners of ‘Prices Dropped’ and ‘Down Down.’
Allegations of Misleading Discount Pricing
The ACCC's actions are set to be heard in the Federal Court, where the regulator will assert that Coles and Woolworths breached Australian Consumer Law. The focus is on discount pricing claims that allegedly misled consumers regarding hundreds of common supermarket products.
The regulator claims that these products were sold at long-term regular prices, excluding any short-term promotions, for periods ranging from six months to a year. The ACCC contends that prior to being featured in Woolworths’ ‘Prices Dropped’ and Coles’ ‘Down Down’ promotions, the prices of these items were increased by at least 15%. Consequently, while the promotional prices were lower than these inflated prices, they were still higher than or equal to the previous regular long-term prices.
ACCC Chair’s Statement
ACCC Chair Gina Cass-Gottlieb stated that these marketing campaigns have led consumers to form an inaccurate perception of the pricing of these products. She noted that, over the years, Australian shoppers have come to believe that the ‘Prices Dropped’ and ‘Down Down’ promotions signify a genuine and sustained reduction in regular prices.
However, the ACCC alleges that the new promotional prices were, in many cases, equal to or greater than the previous regular prices. Cass-Gottlieb further claimed that the companies had already decided to include these products in their promotions prior to the price increases, specifically to establish a higher ‘was’ price.
Market Reaction
As the news of the legal proceedings broke, Coles shares were trading at $18.60, reflecting a decline of 3.23% since the market opened. Woolworths shares were down 3.17%, trading at $33.87.
The unfolding legal actions against Coles and Woolworths highlight significant concerns about consumer protection and the integrity of pricing practices in the retail sector. As the ACCC aims to uphold Australian Consumer Law, the outcomes of these proceedings could have lasting implications for both companies and their promotional strategies.
