Coles Group Ltd. and Woolworths Group Ltd., Australia’s largest supermarket chains, are facing legal action from the Australian Competition & Consumer Commission (ACCC) for allegedly misleading consumers regarding discount pricing on hundreds of common products. The ACCC claims that both companies temporarily inflated prices on popular items, such as Coca-Cola, Tim Tams biscuits, and Colgate toothpaste, before lowering them back to the original price or only slightly below it.
“The discounts were, in fact, illusory,” stated ACCC Chair Gina Cass-Gottlieb in a press release on Monday. She emphasized the importance of accurate pricing, especially as many consumers rely on discounts to manage their grocery budgets amid ongoing cost-of-living pressures.
Australia’s supermarket sector is notably concentrated, with Woolworths and Coles commanding just over half the market share, according to Bloomberg Intelligence. Both chains have faced increased scrutiny and political criticism due to rising inflation, which has led the government to impose higher penalties for anti-competitive practices.
“These are serious allegations that the ACCC is bringing before the courts,” commented Australian Prime Minister Anthony Albanese. “If found true, this behavior is completely unacceptable. Customers should not be treated as fools by supermarkets.”
Recent inflation data for the June quarter indicated that housing and food were major contributors to rising prices, particularly non-alcoholic beverages. The Australian Bureau of Statistics noted that increases in food prices were driven by costs associated with fruit and vegetables, dining out, and meat and seafood.
Woolworths, which reported a 5.6% increase in Australian food sales to A$50.7 billion ($34.5 billion) for the last fiscal year, stated it will “carefully” review the ACCC’s allegations. Meanwhile, Coles, whose supermarket sales rose 6.2% to A$39 billion, announced its intention to defend against the claims.
In early Sydney trading, shares of both retailers dropped by at least 3.8%. Analysts from Jefferies, including Michael Simotas, noted that while the outcome of the litigation is uncertain, the potential penalties could be substantial. They also suggested that, regardless of the legal outcome, the situation could negatively impact consumer perceptions of the major supermarkets.
The ACCC has adopted a firmer approach to consumer protection in Australia, where duopolies and oligopolies exist in various sectors, including air travel, banking, and telecommunications. Earlier this year, it successfully secured a A$100 million penalty from Qantas Airways for selling tickets on flights it had already canceled.
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