Woolworths is accused of misleading customers with fake discounts during its 'Prices Dropped' promotion, according to the ACCC in a federal court trial. This case follows a similar lawsuit against Coles for alleged deceptive pricing practices.
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Woolworths engaged in “marketing magic” to trick customers into thinking they were getting genuine discounts as part of the supermarket’s “Prices Dropped” promotion, the consumer regulator has told a court.
The landmark trial between the Australian Competition and Consumer Commission (ACCC) and Woolworths began in the federal court in Sydney on Tuesday, almost two months after hearings ended in its very similar case against Coles.
The ACCC alleges Coles and Woolworths broke Australian consumer law by offering “illusory” discounts on hundreds of everyday products through the misleading use of their respective “Down Down” and “Prices Dropped” promotion programs.
During the ACCC’s opening statements on Tuesday, Justice Michael O’Bryan pressed the consumer watchdog’s lawyers on one of its central claims.
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The ACCC alleges that, between September 2021 and May 2023, Woolworths temporarily increased the prices of at least 266 products before placing them on “Prices Dropped” promotions to make shoppers think they were getting a discount.
The strategy is known as comparative or “was”/“is” pricing.
The third “discounted” price was in most cases higher than the original long-term price had been before the short-term price spike, which the ACCC argues was a deliberate strategy to soften price increases that had been planned in advance.
Court documents show the products were sold at their first price for 180 days or longer, before their prices were increased by at least 15% but only for a period of 45 days or less.
O’Bryan questioned whether the length of time the items were sold at the second, increased price was relevant to the ACCC’s argument that Woolworths had falsely communicated to customers they were getting a discount on the third price.
He said shoppers probably would not analyse the “was/is” prices on an item’s promotional ticket to such a degree, and the ACCC’s case relied on a “level of analysis that consumers aren’t going to think about”.
“Whether … the saving is … real might depend upon a range of factors including the period [of time] in which the ‘was’ price had been in the market, but also including how was the ‘was’ price established,” he said.
O’Bryan asked similar questions of the ACCC in its case against Coles in February. On Tuesday, the watchdog’s barrister, Michael Hodge, pushed back.
The ACCC claims that Woolworths engaged in misleading marketing practices by offering illusory discounts during its 'Prices Dropped' promotion.
The case against Woolworths is similar to a previous lawsuit by the ACCC against Coles, both involving allegations of deceptive discount promotions.
'Illusory' discounts refer to promotions that create a false impression of savings, misleading consumers about the actual price reductions on products.
The trial against Woolworths is taking place in the federal court in Sydney, Australia.
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Hodge said consumers “at least” understood “very simple” concepts, including that a “Prices Dropped” ticket meant an item’s long-term, regular price had genuinely decreased.
“It communicates to a consumer that Woolworths has done something remarkable or unusual, it has dropped the regular shelf price,” Hodge said.
He described the strategy as “subtle magic” and “marketing magic”.
He presented to the court an example of a family pack of Oreos, which was at a first price of $3.50 for nearly two years, then lifted by 43% to $5 for 22 days before it was placed on Prices Dropped program at a price of $4.50.
He said that while the item’s new ticket told consumers the packet of biscuits “was” $5, they were paying a dollar more than the month before.
“If they were to contrast this price history with what is conveyed to them on the product, the view that they would form is that the ticket was misleading or false,” he said.
The statement of agreed facts between the ACCC and Woolworths shows the supermarket often negotiated with suppliers to offer “discounts” on products at the same time as it agreed to raise their prices.
In 265 cases, the pre-planned “Prices Dropped” price was more expensive than the products’ long-term prices before the price spike, and in 11 cases was the same price.
Of 245 products identified by the ACCC, Woolworths and the supplier had agreed on the item’s final “discounted” price in advance before the products were temporarily inflated.
In the case of 232 products, the suppliers bore at least some of the financial burden of having their products included in the “Prices Dropped” program, which reduced their profit margins.
Woolworths phased out its use of the “Prices Dropped” program at the end of 2024.