By
2022-2023 Coles Supermarkets Pty Ltd and Woolworths Group
Limited collectively accounted for approximately 67% of national
supermarket retail sales and over 57% of national take-home food and
grocery sales.
According
to the ACCC
Supermarket Inquiry 2024-25 Interim Report (August 2024)
the two groups have achieved this by increasing their number of
stores, expanding their geographic coverage and increasing the number
of supermarkets in existing coverage areas. They have also expanded
their businesses into broader “ecosystems”, supplying an
increasing range of products and services in related or adjacent
markets. So that in rural and regional Australia either Coles or
Woolworths supermarkets are sometimes the only source supermarket
shopping.
COLES
On
27 August 2024 the company secretary released to the market the 2024
Full Year Results Presentation for Coles Group Limited.
This presentation revealed that Coles 2023-24 reported group earnings
before interest and taxes (EBIT) totalled $2,057 million, with
underlying EBIT at $2,175 million, and the group's total sales
revenue came in at $43.57 billion.
Across
its supermarket and liquor outlets online & e-commerce sales,
growth reached +30.1% and +9.2% respectively. With Exclusive
to Coles
brand sales grew by 6.6%.
Highlighting
the fact that it was "Delivering value":
✓ ‘Great
Value, Hands Down’ campaigns, every day
low prices, weekly specials and promotions
✓ Launched
>1,100 Exclusive to Coles and 244 Exclusive
Liquor Brand products
✓ National
roll out of instant $10 off at checkout for Flybuys
members
So
proud was the Cole's Group of its Great Value, Hands Down’
campaigns that it even
supplied a graphic:
The
Coles Group net profit after tax in 2023-34 was $1.11 billion.
WOOLWORTHS
A
day later on 28 August 2024 the Woolworths
Group
released to the market itsF24 Full Year Profit and Dividend Announcement.
In
a more restrained presentation (no colourful graphics) it informed
the market that the Woolworths Group 2023-24 reported group earnings
before interest and taxes (EBIT) totalled $3,223 million, with an
EBITA at $6,001 million ($4,821 million being assigned to Woolworths
Food Retail), and the group's total sales revenue came in at $68.9
billion ($50.2 billion being Woolworths Food Retail sales revenue) .
In
the 2023-24 financial year Woolworths Group sales were reported as
growing by 3%, which included strong digital and e-commerce growth.
While Food Retail sales growth came in at 3.4%.
The
Woolworths Group reported in its presentation that:
"...inflation
in our Food businesses and BIG W moderated significantly as we
lowered prices and passed on lower cost prices to customers. Average
prices in Woolworths Food Retail in Q3 and Q4 were down 0.2% and 0.6%
respectively on the prior year",
and
further into the document pointed out that:
"average
prices in Q4 decreasing by 0.6% compared to the prior year".
The
Woolworths Group net profit after tax in 2023-34 was $1.08 billion.
Both
supermarket giants professed general satisfaction with their
respective financial situations - despite the est. $1.6 billion in
write downs affecting Woolworths bottom line - and to ordinary
Australian households still experiencing cost-of-living headwinds
these supermarkets appeared to be doing very well.
In Australia cost-of-living
stress has been an ongoing issue for the last twenty months - when
first the Russian invasion of Ukraine was followed by successive
Australian Reserve Bank interests rate rises, along with domestic
adverse weather events, which affected supply, transport and costs for a wide range of goods & services.
So
when this made the news, it confirmed what many had begun to suspect.
AUSTRALIAN
COMPETITION & CONSUMER COMMISSION v COLES SUPERMARKETS AUSTRALIA
PTY LTD (ACN 004 189 708) and
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v
WOOLWORTHS GROUP LIMITED (ACN 000 014 675) currently
before the Federal Court of Australia - Victoria Registry - filed 23 September 2024.
Australian
Competition & Consumer Commission (ACCC),
media
release, 23 September
2024:
ACCC
takes Woolworths and Coles to court over alleged misleading ‘Prices
Dropped’ and ‘Down Down’ claims
The
ACCC has commenced separate proceedings in the Federal Court against
Woolworths Group Limited (Woolworths) (ASX: WOW) and Coles
Supermarkets Australia Pty Ltd (Coles) (a subsidiary of Coles Group
Limited - ASX: COL) for allegedly breaching the Australian Consumer
Law by misleading consumers through discount pricing claims on
hundreds of common supermarket products.
The
ACCC’s 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
products were then subject to price rises of at least 15 per cent for
brief periods, before being placed in Woolworths’ ‘Prices
Dropped’ promotion and Coles’ ‘Down Down’ promotion, at
prices lower than during the price spike but higher than, or the same
as, the regular price that applied before the price spike.
“Following
many years of marketing campaigns by Woolworths and Coles, Australian
consumers have come to understand that the ‘Prices Dropped’ and
‘Down Down’ promotions relate to a sustained reduction in the
regular prices of supermarket products. However, in the case of these
products, we allege the new ‘Prices Dropped’ and ‘Down Down’
promotional prices were actually higher than, or the same as, the
previous regular price,” ACCC Chair Gina Cass-Gottlieb said.
“We
allege that each of Woolworths and Coles breached the Australian
Consumer Law by making misleading claims about discounts, when the
discounts were, in fact, illusory.”
“We
also allege that in many cases both Woolworths and Coles had already
planned to later place the products on a ‘Prices Dropped’ or
‘Down Down’ promotion before the price spike, and implemented the
temporary price spike for the purpose of establishing a higher ‘was’
price,” Ms Cass-Gottlieb said.
The
ACCC alleges the conduct involved 266 products for Woolworths at
different times across 20 months, and 245 products for Coles at
different times across 15 months. The representations were made on
pricing tickets displayed to consumers in-store on supermarket
shelves and online, usually with a ‘was’ price displayed showing
what the price was during the short-term price spike and the date of
that price.
The
ACCC identified this conduct through consumer contacts to the ACCC
and social media monitoring, and then conducted an in-depth
investigation using its compulsory powers.
“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,” Ms Cass-Gottlieb said.
“We
allege these misleading claims about illusory discounts diminished
the ability of consumers to make informed choices about what products
to buy, and where.”
The
ACCC estimates that Woolworths and Coles sold tens of millions of the
affected products and derived significant revenue from those sales.
The
ACCC is seeking declarations, penalties, costs and other orders. 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.
Alleged
conduct
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 per cent for a relatively short period of
time, and subsequently placed it onto their ‘Prices Dropped’ or
‘Down Down’ program.
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.
Alleged
conduct by Woolworths
The
ACCC alleges that Woolworths made false or misleading representations
to consumers about the prices of 266 products during the period
between September 2021 and May 2023.
Products
affected include Arnott’s Tim Tams biscuits, Dolmio sauces, Doritos
salsa, Energizer batteries, Friskies cat food, Kellogg’s cereal,
President butter, Listerine mouthwash, Moccona coffee capsules,
Mother energy drinks, Mr Chen’s noodles, Nicorette patches, Ocean
Blue smoked salmon, Oreo cookies, Palmolive dishwashing liquid, Raid
insect spray, Sprite soft drink, Stayfree pads, Twisties, Uncle Tobys
muesli bars, and Vicks VapoDrops.
Example
- Oreo Family Pack Original 370g
[A
graph showing the pricing movement of Oreos Family Pack Original
cookies from January 2021 to May 2023]
From
at least 1 January 2021 until 27 November 2022, Woolworths offered
the Oreo Family Pack Original 370g product for sale at a regular
price of $3.50 on a pre-existing ‘Prices Dropped’ promotion for
at least 696 days.
On
28 November 2022, the price was increased to $5.00 for a period of 22
days. On 20 December 2022, the product was placed on a ‘Prices
Dropped’ promotion with the tickets showing a ‘Prices Dropped’
price of $4.50 and a ‘was’ price of $5.00. The ‘Prices Dropped’
price of $4.50 was in fact 29 per cent higher than the product’s
previous regular price of $3.50.
In
this example, the ACCC alleges Woolworths had planned the temporary
price spike to establish a new higher ‘was’ price for the
subsequent ‘promotion’. Woolworths had decided (after a request
from the supplier for a price increase) on or around 18 November 2022
to take the product off ‘Prices Dropped’, increase the price, and
then put the product back on to ‘Prices Dropped’ three weeks
later.
Alleged
conduct by Coles
The
ACCC alleges that Coles made false or misleading representations to
consumers about the prices of 245 products during the period between
February 2022 and May 2023.
Products
include Arnott’s Shapes biscuits, Band-Aids, Bega cheese, Cadbury
chocolates, Coca Cola soft drink, Colgate toothpaste, Danone yoghurt,
Dettol multi-purpose wipes, Fab laundry liquid, Karicare formula,
Kellogg’s snack bars, Kleenex tissues, Libra tampons, Lurpak
butter, Maggi two-minute noodles, Nature’s Gift dog food, Nescafe
instant coffee, Palmolive shampoo, Rexona deodorant, Sakata rice
crackers, Sanitarium Weet-Bix cereal, Strepsils lozenges, Sunrice
rice, Tena pads, Viva paper towels, Whiskas cat food, and Zafarelli
pasta.
Example
Strepsils Throat Lozenges Honey & Lemon 16 pack
[A
graph showing the pricing movement of Strepsils Throat Lozenges Honey
& Lemon 16 pack from January 2021 to May 2023]
From
at least 1 January 2021 until 11 October 2022, Coles offered the
Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale
at a regular price of $5.50 (on a pre-existing ‘Down Down’
promotion) for at least 649 days, including one seven-day short-term
special.
On
12 October 2022, the price was then increased to $7.00 for a period
of 28 days. On 9 November 2022, the product was placed on a ‘Down
Down’ promotion with the tickets showing a ‘Down Down’ price of
$6.00 and a ‘was’ price of $7.00. The ‘Down Down’ price of
$6.00 was in fact 9 per cent higher than the product’s previous
regular price of $5.50.
In
this example, the ACCC alleges Coles had planned the temporary price
spike to establish a new higher ‘was’ price for the subsequent
‘promotion’. Coles had decided (after a request from the supplier
for a price increase) on or around 7 October 2022 to take the product
off ‘Down Down’, increase the price, and then put the product
back on to ‘Down Down’ four weeks later.
ACCC
Supermarkets inquiry
The
ACCC was directed by the Treasurer in January 2024 to conduct an inquiry into the Australian supermarket sector, pricing practices and
the relationship between wholesale, farmgate and retail prices.
The
ACCC’s investigation into the conduct which is the subject of these
proceedings pre-dates this inquiry. The inquiry will not consider the
issues in dispute in these proceedings.
Note
to editors
The
ACCC does not regulate supermarket prices.
The
ACCC has taken proceedings in respect of alleged breaches of the
Australian Consumer Law, which provides that businesses must not make
false or misleading statements about prices.
Separate
proceedings are brought against Woolworths and Coles, and the ACCC is
not making any allegation of any collusion or anti-competitive
conduct by Woolworths and Coles as part of these proceedings.
The
ACCC is not alleging any contravention of the ACL by any of
Woolworths’ and Coles’ suppliers in these proceedings.
The
maximum penalty for each breach of the Australian Consumer Law
increased on 10 November 2022, part way through the period of the
alleged conduct. For contraventions from 10 November 2022, the
maximum penalty is the greater of:
- if
the Court can determine the value of the 'reasonably attributable'
benefit obtained, three times that value, or
Any
penalty that might apply to this conduct is a matter for the Court to
determine and would depend on the Court’s findings. The ACCC will
not comment on what penalties the Court may impose.
Background
Woolworths
runs the largest supermarket chain in Australia, with about 1,140
Woolworths supermarket stores across the country.
The
‘Prices Dropped’ Program is promoted by Woolworths as a shelf
price reduction program designed to offer Woolworths’ customers
consistently low prices over a prolonged period. The objective of the
Prices Dropped Program was to lower the standard shelf price of a
product from its previous standard (or regular) shelf price.
Example
of a Prices Dropped ticket
Coles
is the second-largest supermarket chain in Australia, operating more
than 840 stores nationally.
Coles
introduced the ‘Down Down’ Program in June 2010 and marketed it
as a promotional campaign designed to reduce the regular shelf price
of commonly purchased products — thereby offering customers
predictable and reliable value on the items they purchased the most
and reducing the cost of their shopping basket.
Example
of a Down Down ticket
Separate
to these proceedings, in December 2023, following a complaint by
CHOICE and an investigation by the ACCC, Coles announced refunds for
thousands of customers after it raised the price on 20 products that
it had promised would remain ‘locked’ for a certain period of
time as part of Coles’ ‘Dropped and Locked’ promotion.
Concise
statements
ACCC
v Coles - Concise Statement ( PDF 662.68 KB )
ACCCv Woolworths - Concise Statement ( PDF 727.3 KB )
These
documents contain the ACCC’s initiating court documents in relation
to these matters. We will not be uploading further documents in the
event these initial documents are subsequently amended.
~~~~~~~~~~~~~
The Guardian, 23 September 2024, excerpt:
“Coles
sought to strike an appropriate balance between managing the impact
of cost price increases on retail prices and offering value to
customers through the recommencement of promotional activity as soon
as possible after the establishment of the new non-promotional
price.”
Woolworths
said it would “carefully review the claims”.
“Our
customers are telling us they want us to work even harder to deliver
meaningful value to them and it’s important they can trust the
value they see when shopping our stores,” Woolworths said.
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