Australia sues grocery giants Woolworths and Coles over ‘illusory’ discounts Reuters

By Byron Kaye and Ayushman Ojha

(Reuters) – Australia’s consumer watchdog accused the country’s two biggest supermarket chains of misleading shoppers about discounts on hundreds of products in lawsuits filed on Monday, ratcheting up pressure on the sector amid a cost-of-living crisis.

The legal action marks a major move against the supermarket giants, which have faced scrutiny from lawmakers and regulators for hitting consumers with high prices at a time when interest rates, housing costs and energy bills have soared. also suddenly

In separate proceedings, the Australian Competition and Consumer Commission said Woolworths and Coles kept prices flat on certain products for up to two years, then increased them only to advertise them as going on sale shortly afterwards.

The purported sale price was higher than the original price, the lawsuits said. In some cases, the companies intentionally raised prices with the goal of setting a higher “era” price, the suits say.

“The price reductions as advertised were misleading because the reduction was illusory,” commission chairwoman Gina Cass-Gottlieb told reporters, adding that it affected millions of units of product.

The commission said it was seeking unspecified penalties, but noted that potential fines for breaching consumer protection law were A$50 million, 30% of turnover during the period of wrongdoing, or three times the amount that the company benefited from the crimes.

The penalty “must be large enough not to represent a ‘cost of doing business,’ to deter them from this behavior in the future and to deter all retailers from this course of conduct,” Cass-Gottlieb said.

Prime Minister Anthony Albanese, who has faced pressure to do more to tackle rising food prices and is heading to an election within a year, said the regulator’s alleged actions would be unacceptable if true.

“Customers don’t deserve to be treated like fools by supermarkets,” he told reporters.

Woolworths said in a statement it would look into the commission’s claims, while Coles said it would defend the case.

Shares in the two companies, which together account for two-thirds of Australian grocery sales, fell as much as 4% after the announcement.

Jefferies analyst Michael Simotas said it was hard to predict the outcome of the cases, but the penalties could be significant.

“We expect this matter to increase pressure on consumer perception of large supermarkets and continue to be compounded by sales leakage to non-traditional channels,” he said.

The current CEOs of both companies started after the period covered by the lawsuit, from September 2021 to May 2023. In a Senate hearing in April 2024, then Woolworths CEO Brad Banducci said shoppers would go elsewhere if his company engaged in price gouging.

Albanese announced a bill on Monday to impose a mandatory code of conduct on the food industry, with millions of dollars in fines for violations.

His centre-left Labor government has ruled out giving the competition regulator the power to crack down on supermarket companies.

($1 = 1.4684 Australian dollars)