On Monday, the Australian Competition and Consumer Commission (ACCC) announced it has separately launched Federal Court actions against Coles and Woolworths, alleging that their respective “Down Down” and “Prices Dropped” campaigns misled consumers in discount pricing claims.
The ACCC claims these iconic campaigns gave customers the impression that the supermarkets sustained price reductions on essential products when many of the “Down Down” / “Prices Dropped” prices had stayed the same for long periods except for price reductions that followed short-term price increases.
Read on for a summary of these important proceedings and the actions we recommend retailers take in response.
The ACL and misleading savings claims
Both Coles and Woolworths allegedly contravened sections 18 and 29(1)(i) of the Australian Consumer Law (ACL). Section 18 prohibits businesses engaging in conduct that is misleading or deceptive, or is likely to mislead or deceive. This section has broad application. Section 29(1)(i) specifically prohibits making false or misleading representations with respect to the price of goods or services.
Coles
The ACCC’s allegations against Coles focus on the “Down Down” promotional campaign, which claimed to offer long-term price reductions on a range of essential products. According to the ACCC’s Concise Statement of Fact, Coles increased the prices of at least 245 products for a short period before placing them on the “Down Down” promotion.
The ACCC claims that the “Down Down” prices of many of these products were higher than their regular price before the temporary spike, or in some cases, the same as their pre-promotion price. The ACCC alleges the short price increases were implemented to create a higher previous price, giving the false impression that the promotional price offered a significant discount.
For example, for the period between 1 January 2021 and 11 October 2022, the Coles regular price for a 16 pack of Strepsil Honey & Lemon Throat Lozenges was $5.50. The price was then increased for a period of 28 days to $7.00 before being reduced under the “Down Down” campaign to $6.00, 9% higher than its previous longstanding regular price.
Woolworths
Woolworths is alleged to have increased the prices of at least 266 different products before including them in its “Prices Dropped” promotion at a price that was higher than, or the same as, the price that was advertised prior to the price spike.
Importantly, the ACCC alleges that these spikes were deliberate and planned, and in some cases, made in direct response to requests from suppliers to increase prices.
Compared to the periods when the products had been sold at the pre-spike periods, price spike periods were relatively short – 45 days or less – before prices were dropped. In 265 instances, the ‘Prices Dropped’ price was higher than the product’s pre-spike price.
For example, Woolworths sold a 470g pack of Oreos for $3.50 for 22 months, before increasing the price to $5.00 in November 2022. 33 days later, the product was placed on the ‘Prices Dropped’ promotion at a price of $4.50, and Woolworths advertised the previous price as $5.00, despite the long-term previous price being $3.50.
The ACCC alleges that a separate contravention of sections 18 and 29(1)(i) of the ACL occurred each time it made a “Prices Dropped” representation like the one above for the 266 products in question. The ACCC stated that this conduct meant that consumers were diminished in their ability to make informed choices about their essential purchases, and noted that these alleged contraventions occurred during a period of increased cost of living pressures.
Implications for retailers
The ACCC’s action highlights the critical importance of transparency and accuracy in pricing claims, particularly in large-scale promotional campaigns. It is an indicator that the ACCC will closely scrutinise retailers’ establishment of higher ‘was’ pricing in order to create the impression of a discount. It will be important to see how the Court rules on these points, the decision could significantly impact retailers’ price advertising strategies. In the meantime, it seems clear that the ACCC is particularly concerned with retailers:
- increasing the price of their products for a short period to establish a higher than normal price in order to show a higher discount, particularly when the price increase period is much shorter than the “pre-spike” period; and
- advertising the post-increase price as a discount off the price that was established during a short price spike period, particularly when the post-increase price is higher than the price the product was sold at for a long time prior to the price increase.
Actions for retailers
In light of the ACCC’s action, we recommend that retailers:
- record – keep a detailed record of their pricing history
- review – review pricing and discounting strategies for compliance with sections 18 and 29(1)(i) of the ACL
- process – adopt internal processes to review and verify the accuracy of pricing before launching promotional campaigns. Effective marketing teams involve legal and compliance expertise at the start of campaign development, to assess whether discounts reflect genuine reductions and whether past pricing is represented correctly
- train – ensure all relevant staff are trained and knowledgeable about pricing regulations.
Compliance and creativity can go hand-in hand. By staying vigilant, adopting internal processes to ensure ACL compliance and delivering transparency in pricing, businesses can develop effective promotional campaigns while also protecting their reputation and maintaining consumer trust.
CIE Legal are leading advisers to consumer products businesses. We are experienced in guiding retailers on pricing and discount strategies that comply with the ACL. If you would like advice on these issues, training, or a compliance audit of your current retail advertising strategy, please get in touch.
