Australia Takes Legal Action Against Grocery Giants Woolworths and Coles Over ‘Illusory’ Discounts

By Byron Kaye and Ayushman Ojha

Australia’s consumer watchdog has accused the country’s two largest supermarket chains of misleading customers regarding discounts on hundreds of products, as part of lawsuits filed on Monday. This action adds to the growing scrutiny faced by the sector amid a challenging cost-of-living crisis.

The legal proceedings represent a significant challenge to the supermarket giants, who have come under fire from lawmakers and regulators for imposing high prices during a period marked by rising interest rates, housing costs, and energy bills.

In separate lawsuits, the Australian Competition and Consumer Commission (ACCC) alleged that Woolworths and Coles maintained prices for certain items for up to two years before raising them and then marketing these increased prices as discounted sales. The supposed sale price was reportedly higher than the original price, with claims that the companies intentionally inflated prices to create a misleading perception of savings.

"The price discounts as promoted were misleading because the discounts were essentially deceptive," stated ACCC Chair Gina Cass-Gottlieb, highlighting that this issue has impacted millions of products.

The ACCC is pursuing unspecified penalties but has noted that potential fines for violating consumer laws could reach up to A$50 million, or amount to 30% of turnover during the period in question, or even three times the financial benefit gained from the alleged misconduct. Cass-Gottlieb emphasized that the penalties must be substantial enough to deter such behavior in the future.

Prime Minister Anthony Albanese, facing pressure to address escalating grocery prices ahead of an upcoming election, remarked that if the allegations are accurate, they would be unacceptable. "Customers should not be treated as fools by the supermarkets," he declared.

In response to the allegations, Woolworths indicated it would review the ACCC’s claims, while Coles expressed its intention to defend against the lawsuit. Following the announcement, shares of both companies—who together account for two-thirds of the Australian grocery market—dropped by as much as 4%.

Analyst Michael Simotas from Jefferies noted the uncertainty surrounding the outcomes of these cases but suggested that penalties could be serious, stating, "We expect this matter will heighten the pressure on major supermarkets’ consumer perception and contribute to a shift in sales towards non-traditional retail channels."

Both companies’ current CEOs took office after the timeline specified by the lawsuit, which covers September 2021 to May 2023. During a Senate hearing in April 2024, then-Woolworths CEO Brad Banducci remarked that if his company engaged in price gouging, consumers would choose to shop elsewhere.

On the same day, Albanese unveiled draft legislation aimed at instituting a mandatory code of conduct for the grocery sector, imposing significant fines for violations. His center-left Labor government has ruled out granting the competition regulator the authority to dismantle the supermarket chains.