Woolworths Faces Landmark Trial Over Alleged 'Illusory' Discounts
The Australian Competition and Consumer Commission (ACCC) has launched a landmark legal battle against supermarket giant Woolworths, alleging the company engaged in deceptive marketing practices to trick customers with fake discounts. The trial, which began in the Federal Court in Sydney, centers on Woolworths' 'Prices Dropped' promotion program that the consumer watchdog claims violated Australian consumer law.
'Marketing Magic' to Mislead Shoppers
During opening statements, ACCC barrister Michael Hodge described Woolworths' strategy as "marketing magic" designed to create the illusion of genuine price reductions. The ACCC alleges that between September 2021 and May 2023, Woolworths temporarily increased prices on at least 266 everyday products before placing them on "Prices Dropped" promotions, making consumers believe they were getting discounts when they were actually paying more than the original long-term prices.
The consumer watchdog presented detailed evidence showing products were typically sold at their initial price for 180 days or longer before experiencing price increases of at least 15% for periods of 45 days or less. These temporarily inflated prices then became the "was" price on promotional tickets, with the "dropped" price representing what the ACCC argues was actually a planned price increase disguised as a discount.
Court Scrutinizes Pricing Strategy
Justice Michael O'Bryan questioned the ACCC's arguments during proceedings, suggesting that consumers might not analyze promotional tickets with the level of scrutiny the regulator assumes. "Whether the saving is real might depend upon a range of factors," Justice O'Bryan noted, including how the "was" price was established and the time periods involved.
However, Hodge countered that consumers understand basic concepts, including that a "Prices Dropped" ticket should indicate a genuine reduction from the regular shelf price. "It communicates to a consumer that Woolworths has done something remarkable or unusual, it has dropped the regular shelf price," Hodge argued.
Specific Examples Presented in Court
The ACCC presented several specific examples to illustrate their allegations. One case involved a family pack of Oreos that sold for $3.50 for nearly two years before Woolworths increased the price by 43% to $5 for just 22 days. The product was then placed on the "Prices Dropped" program at $4.50, creating the appearance of a discount when consumers were actually paying a dollar more than they had a month earlier.
Another example focused on Lucky Dog Bones, which sold at $4.50 under the "Prices Dropped" promotion for over a year before Woolworths increased the price to $6.50 for 29 days. The product then returned to the "Prices Dropped" program at $6 for several months.
Woolworths Defends Its Practices
Robert Yezerski, SC, representing Woolworths, strongly rejected the ACCC's allegations in his opening submissions. He argued that the period in question was one of high inflation where suppliers were requesting significant cost increases and consumers expected prices to rise.
"The idea that the consumer is approaching their weekly shop on the basis that there's some assumed level of price stability ... we think is just not correct as a matter of evidence," Yezerski stated. He emphasized that Woolworths denied the ACCC's central allegation that temporary price increases were implemented solely to establish higher "was" prices for later promotional discounts.
Yezerski presented the Lucky Dog Bones example from Woolworths' perspective, noting that supplier Nestle Purina had recommended the retail price increase to $6.50. "The ACCC's contention that that increase in price to $6.50 was artificial or was only for the purpose of showing a drop in price, we say is just not reconcilable with the true facts and with the negotiation," he argued.
Broader Context and Similar Cases
This trial follows similar proceedings against Coles that concluded approximately two months earlier, with both supermarket giants facing allegations of using deceptive discounting practices. Court documents reveal that Woolworths often negotiated with suppliers to offer "discounts" on products at the same time as agreeing to raise their prices.
Of the 245 products specifically identified by the ACCC, Woolworths and suppliers had agreed on final "discounted" prices in advance before products experienced temporary price inflation. The trial will scrutinize 12 specific products in detail as representative examples of the broader allegations.
Woolworths phased out its "Prices Dropped" program at the end of 2024, but the legal proceedings examine practices during the 2021-2023 period when the promotions were actively used. The outcome of this landmark case could have significant implications for retail pricing practices and consumer protection enforcement across Australia's supermarket sector.
