Why it took people power to bring Australia’s two biggest supermarkets to court

With the price of everyday items front of mind for many consumers at the check-outs, it shouldn’t come as a shock that the actions of our major supermarket giants are under the microscope. Negative headlines about Australia’s two biggest grocers have dominated the past 12 months, and accusations have run the gamut from price gouging to tricky relationships with suppliers. And then there was that now-infamous Four Corners interview walkout. Adding to the deluge of bad press was the news yesterday that Australia’s biggest grocers would be hauled to the Federal Court by the consumer watchdog. Why? Because Coles and Woolworths systematically misled customers about discounts on hundreds of products — including Tim Tams, Doritos salsa and Energizer batteries — according to the Australian Competition and Consumer Commission (ACCC). Both companies allegedly did this by selling items at regular prices for up to six months before increasing the prices of those items by at least 15 per cent and then placing them in the “Prices Dropped” Woolworths promotion or “Down Down” Coles promotion. It meant consumers were duped by promotions about discounts that were “illusory” and, rather than being lower, some prices were actually higher, according to the ACCC. After months of scrutiny over supermarket prices, the court action is yet another blow to Coles’ and Woolworths’ reputations, which were already under a cloud due to growing consumer distrust. But perhaps one of the more interesting details from yesterday’s announcement was not the accusation nor the court case, but who prompted the action. It was largely people power — not consumer action groups — that spurred the ACCC to take the supermarket giants to court. Regular customers, fed up with Coles and Woolworths’ marketing tactics, had complained to the ACCC and taken to social media to hold supermarkets to account. In doing so they set off a chain of events that eventually saw our biggest grocers dragged before the courts for allegedly breaching consumer law. Coles and Woolworths under the microscope For some time now, the supermarket giants’ pricing of everyday items has been under scrutiny. Not only have the mega-grocers been aware of it but they have been quick to pull apart the claims made against them. When a Choice survey in June found that a list of 14 staples at Aldi was roughly 25 per cent cheaper than it was at Coles and Woolworths, the two grocers questioned the data. But the consumer group argued the real value of its findings for consumers would come as more reports were handed down. It wasn’t wrong. More reports are on the way — and Choice isn’t the only one holding supermarkets to account. For most of this year, the ACCC has been examining the prices of the mega-grocers. After receiving tens of thousands of submissions, the consumer watchdog handed its interim report to the government on August 30. While seemingly occurring at the same time as its probe into misleading claims, ACCC chair Gina Cass-Gottlieb said the issues raised in its court action yesterday were “brought to us before the commencement of the supermarket inquiry”. “The supermarket inquiry is excluding and not considering those specific elements,” she added. So it’s likely another potentially damning supermarket report is on the way, though the results may not be all that surprising to consumers. For months, households grappling with higher interest rates and higher inflation have complained of price gouging at the check-out and deceptive marketing campaigns. “You see some of these signs [on supermarket shelves] that say it’s on special and then you look underneath it and it’s five cents off, 10 cents off. It’s all rubbish,” Brisbane resident Steve told the ABC. Even as both supermarkets have denied allegations of price gouging, the perception it is occurring has driven angry consumers to take their complaints to their family, friends and social media. Hundreds of consumers report ‘prices that aren’t genuine’ In announcing the court action yesterday, ACCC chair Gina Cass-Gottlieb was quick to point out what prompted the action or, more accurately, who. “We first identified this conduct because of contact from consumers,” she said. “We then tracked social media and saw on X, Reddit and TikTok that hundreds of consumers were reporting prices that they did not consider were genuine. “We followed that up with our own in-depth investigation using our compulsory powers.” The results spoke volumes. Woolworths has been accused of increasing the prices temporarily of at least 266 different products before putting them on the Prices Dropped campaign, while at least 245 different products have been affected at Coles. Coles said in a statement it would defend the proceedings brought against it and the allegations related to a period of significant cost inflation when it was receiving a large number of cost price increases from suppliers. Woolworths Group said in a statement it would carefully review the claims and engage with the ACCC on the matter. As many consumers seek to manage their household budgets with the use of discounts, Ms Cass-Gottlieb said “it is critical that all pricing claims and price discount claims are accurate”. With inflation outstripping earnings growth, the impact of the current economic climate on households is undeniable. Price changes are being deeply felt across the board, and nowhere is that more noticeable than at the check-out. As many as 3.7 million households in Australia are estimated to have battled concerning levels of food insecurity last year, according to Foodbank Australia’s 2023 Hunger Report, with the cost of living cited as the most common cause. So what could the ACCC court action mean for everyday consumers? If found guilty, both Coles and Woolworths would be required to pay fines, which could act as a deterrent to any future bad behaviour. The ACCC has also said it will seek “declarations” and “community service orders”, which may result in both supermarkets funding a registered charity “to deliver meals to Australians in need”. JP Morgan retail analyst Brian Raymond also wrote in a note that the retailers will likely experience “further negative price perception and brand trust impacts”. This could drive consumers to shop elsewhere or, as Mr Raymond wrote, “underpin market share shift to Aldi”. Expect more scrutiny in the months ahead Over the past year, supermarket profit margins have remained robust even as Australians have cut back on their consumption. It goes against the understanding that as consumers spend less, retailers are forced to compete more aggressively with deep discounts and promotions. While the major supermarkets argue there is healthy competition, the reality is that the sector remains one of the least competitive in the world. And it is not just consumers who feel they have been impacted, but suppliers too. They have routinely accused the grocers of increasing their profits by enforcing cost cuts on them. The accusations date as far back as the 2011 milk wars, which began when Coles discounted its private-label brands to $1, prompting Woolworths to do the same. While consumers benefited from the deep discounts on a basic commodity, the dairy industry complained that its branded products were undercut by contract milk it was supplying the supermarkets for their private labels. Demand for brand milks slumped, while sales of cheaper, private-label products rose at the time. A separate inquiry looking at how big-box retailers engage with their suppliers, which was recommended after the ACCC supermarket probe, is currently underway, with submissions open until the end of the week. In the meantime, consumers looking for changes at the supermarkets will likely have to wait for an outcome in the court case against Coles and Woolworths. Prime Minister Anthony Albanese has already declared the allegations against Coles and Woolworths do not reflect “the Australian spirit”. “Customers don’t deserve to be treated as fools by the supermarkets,” he said yesterday. If found guilty, the ACCC hopes that “significant” fines could deter these billion-dollar companies from carrying out the practice in the future. But they might not.