Askume, Sept 23 – Australia’s consumer watchdog filed a lawsuit on Monday accusing the country’s two biggest supermarket chains of misleading consumers about discounts on hundreds of products, as the cost of living surged.
The legal action is a major move against the supermarket giants, which are facing scrutiny from lawmakers and regulators for charging consumers higher prices at a time when interest rates, housing costs and energy bills are also rising.
In separate proceedings, the Australian Competition and Consumer Commission said Woolworths (WOW.AX) and Coles (COL.AX) kept the prices of some products unchanged for two years and then raised them as soon as they were advertised for sale.
The lawsuit alleges that the alleged sales price was higher than the original asking price. The lawsuit alleges that in some cases, the company intentionally set prices with the goal of setting a higher “original price.”
“The way the price discounts are advertised is deceptive because the discounts themselves are deceptive,” committee chairwoman Gina Kass-Gottlieb told reporters. She said hundreds of thousands of products were affected.
The commission said it is seeking an unspecified penalty, but the potential fine for breaches of consumer law is $50 million, which is equivalent to the greater of 30 percent of the company’s turnover during the period of misconduct or the loss caused by the misconduct, three times.
Kass-Gottlieb said the fines “should be high enough so as not to become a ‘cost of doing business’ to deter them from engaging in this type of conduct in the future and to deter all retailers from engaging in this type of conduct.”
Shares in Woolworths and Coles, which account for two-thirds of Australian grocery sales, fell 4 per cent following the news.
Woolworths said in a statement it would review the commission’s allegations, while Coles said it would defend the case.
Jefferies analyst Michael Simotas said it’s difficult to predict the outcome of the case, but the fine could be substantial.
“We expect this case will put further pressure on consumer confidence in major supermarkets and further complicate the situation as sales in non-traditional channels continue to decline,” he said.
The current CEOs of both companies were targeted by regulators between September 2021 and May 2023. At a Senate hearing in April 2024, Woolworths’ then-chief executive Brad Banducci said that if his company persisted in raising prices, shoppers would go elsewhere.
The centre-left Labor government, which is set to hold a general election within a year, is facing pressure from its political rivals to introduce legislation giving regulators the power to shut down supermarket companies, but has ruled out spin-off powers.
(USD 1 = AUD 1.4684)
