Australia: Woolworths, Coles Sued Over 'Illusory' Discounts

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Facts

  • The Australian Competition and Consumer Commission has taken legal action against Woolworths and Coles, the country's two largest supermarket chains, for allegedly deceiving customers with discount pricing.[1]
  • In separate lawsuits, Australia's consumer watchdog said Woolworths and Coles held prices steady on tens of millions of products for up to two years, then inflated them before placing them in Woolworths' 'Prices Dropped' and Coles' 'Down, Down' promotions.[2][3][4]
  • On Monday, the commission's chair, Gina Cass-Gottlieb, accused the two chains of breaking consumer protection laws by 'making misleading claims about discounts, when the discounts were, in fact, illusory.'[5]
  • The commission is seeking 'significant' penalties to fund registered charities to deliver meals to vulnerable Australians, claiming Woolworths and Coles reaped extra revenue from the wrongdoing at the time of 'cost-of-living pressures.'[6][3]
  • The allegations relate to 266 products Woolworths sold across 20 months and 245 products Coles sold across 15 months. Some products alleged to have misleading pricing include Oreo cookies, Sprite soft drink, Kellogg's cereal, Cadbury chocolates, Band-Aids, and Stayfree pads.[7][8]
  • Coles attributed the increase in product prices to the rising supplier costs and said it would defend itself against the allegations, while Woolworths said it would 'carefully review the claims.'[3][6]

Sources: [1]Wsj, [2]Reuters, [3]Guardian, [4]Australian Competition and Consumer Commission, [5]New York Times, [6]BBC News, [7]The Conversation and [8]Daily Mail.

Narratives

  • Left narrative, as provided by The Australia Institute. This is a massive corporate character failure. Australia's duopoly of grocery store giants abused market power to raise prices at a time when interest rates had also risen sharply, leading to higher inflation. The chains' deception pattern underlines the need to impose a mandatory code of conduct and millions of dollars in fines for breaches and give the competition regulator stronger powers to break up uncompetitive industries. Potential penalties on Woolworths and Coles would deter all retailers from indulging in price gouging and ensure that Australian shoppers aren't cheated in the future.
  • Right narrative, as provided by Guardian. The competition regulator's decision to sue Woolworths and Coles is discriminatory, partisan, and market-unfriendly. Supermarkets aren't charitable organizations, yet they offer promotional programs to provide everyday value and lower prices to customers as well as strive to manage the impact of cost price increases on their profit margin. Instead of enforcing a mandatory code of conduct and forcing businesses to sell some of their assets to reduce their market power, regulators should address the structural imbalances in Australia's supermarket sector and devise a mechanism to effect meaningful change in the marketplace.

Predictions