By Byron Kaye, Ayushman Ojha
(Reuters) – Australia’s consumer regulator on Monday accused the country’s two largest supermarket chains of misleading customers about discounts on hundreds of products, according to legal claims filed in the wake of rising pressure on the sector amid low living costs.
The legal action is a significant step against the supermarket giants, which have come under fire from lawmakers and regulators for imposing high prices on consumers at a time when interest rates, house prices and energy bills have also risen sharply.
In separate lawsuits, the Australian Competition and Consumer Commission alleged that Woolworths and Coles kept prices on certain products the same for up to two years, then increased them but advertised them as being on sale shortly afterwards.
The alleged sale price was higher than the original price, the lawsuits say. In some cases, the companies intentionally raised prices to create a higher “wash” price, the lawsuits say.
“The promoted price reductions were misleading because the discount was illusory,” commission chair Gina Cass-Gottlieb told reporters, adding that millions of items were affected.
The commission said it was seeking unspecified penalties, but noted that potential fines for breaches of consumer law are AUD50 million, 30% of turnover over the period of the breach or three times the amount the company profited from the breach.
The fine “must be high enough not to be a ‘cost of doing business,’ to deter them from engaging in this behavior in the future, and to deter all retailers from engaging in this type of behavior,” Cass-Gottlieb said.
Shares in Woolworths and Coles, which together account for two-thirds of Australia’s supermarket sales, fell as much as 4% after the announcement.
Woolworths said in a statement it will investigate the commission’s claims, while Coles said it will defend the case.
Jefferies analyst Michael Simotas said it was difficult to predict the outcome of the lawsuits, but he said the fines could be significant.
“We expect this issue to increase pressure on consumer perception at major supermarkets and continue to increase sales through non-traditional channels,” he said.
The current CEOs of both companies started after the period covered by the watchdog’s case, from September 2021 to May 2023. At a Senate hearing in April 2024, then-Woolworths CEO Brad Banducci said consumers would go elsewhere if his company engaged in excessive pricing.
The centre-left Labour government, which faces an election within a year, is under pressure from political opponents to introduce legislation giving the regulator the power to break up supermarket chains, but has ruled out such a power.
($1 = 1.4684 Australian dollars)
(Reporting by Byron Kaye and Alasdair Pal in Sydney, and Ayushman Ojha in Bengaluru; Editing by Himani Sarkar, Rashmi Aich and Sonali Paul)
