Last year we wrote about the duopoly that Coles and Woolworths have on the grocery market and whether their impact is increasing inflation. The article can be found here. Coles and Woolworths have now found themselves in hot water as they are now the target of the Australian Competition and Consumer Commission (“ACCC”).
The ACCC is suing Coles and Woolworths primarily for alleged misleading conduct and anti-competitive practices. The claims focus on the grocery giants’ pricing strategies, including misleading promotions and the potential harm to smaller competitors. The ACCC argues that these practices could unfairly affect consumers and competition in the grocery sector. The aim is to ensure fair trading and protect both consumers and smaller retailers from potentially harmful practices in breach of the provisions of the Australian Consumer Law (“ACL”).
What are the allegations?
The ACCC has initiated legal action against Coles and Woolworths for several key reasons:
- Misleading Advertising – The ACCC alleges that both supermarket chains engaged in misleading promotional practices. This includes claims about prices, discounts, and the value of certain products, which may have led consumers to believe they were getting better deals than they actually were. These allegations specifically relate to products sold by each of Woolworths and Coles at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year. These products were then subject to price rises of at least 15% for brief periods, before being placed in Woolworths “Prices Dropped” promotion and Coles “Down Down” promotion, at prices lower than during the price spike, but higher than, or the same as the regular price which applied before their price spike.
- Unfair Competition – The ACCC argues that the pricing strategies employed by Coles and Woolworths could stifle competition, particularly harming smaller retailers. The supermarkets’ ability to leverage their size and resources allows them to engage in practices that smaller competitors cannot match, potentially driving them out of the market.
- Market Dominance – The ACCC is concerned that the dominant market positions of Coles and Woolworths may lead to anti-competitive behaviour that could distort the grocery market, leading to less choice and higher prices for consumers in the long run.
Overall, the ACCC seeks to hold these supermarkets accountable and ensure a level playing field in the grocery sector, benefiting both consumers and smaller businesses.
The role of the ACCC
The ACCC (Australian Competition and Consumer Commission) promotes fair competition and protects consumer rights by preventing anti-competitive practices and misleading advertising. It conducts market studies to assess competition levels, takes legal action against violations of competition or consumer laws, and oversees specific industries to ensure transparency.
In 2016, the ACCC sued Volkswagen who was ordered to pay $125 million in penalties by the Federal Court of Australia for a breach of the Australian Consumer Law. Specifically, that Volkswagen had made false or misleading representations to consumers and regulators about whether their diesel vehicles complied with environmental standards. This was aggravated by the fact that if Volkswagen had not have made these representations, the vehicles would not have legally been allowed to have been sold in Western Australia. Volkswagen sought special leave to appeal the penalty to the High Court, however, this was dismissed in 2021.
In 2009, Coca Cola South Pacific (the company responsible for marketing and technical services for Coca Cola products within Australia), caused an advertisement to be issued discrediting health concerns associated with drinking Coca Cola. The advertisement pointed out “myths” that Coca Cola, makes you fat, rots teeth, and is packed with caffeine. However, upon the allegation by the ACCC that this advertisement was misleading, Coca Cola entered a legally enforceable undertaking not to make representations to consumers implying the health benefits of drinking Coca Cola.
What next?
Coles has issued a statement that they will be defending the proceedings, and Woolworths has stated it will review the claims and work together with the ACCC. Whilst we await the outcome of these proceedings, it is a timely reminder to business owners and those companies who supply goods and services to review their practices to ensure they align with the ACL to save becoming a target of an investigation by the ACCC.
Whilst this article focuses on large corporations, we have seen the ACCC investigate and take action against small businesses and sole director companies.
About the Authors: This article has been co-authored by Chanelle Kane and Steven Brown. Chanelle has been in the industry since 2013 and graduated with a Bachelor of Laws in 2020. Chanelle completed the Graduate Diploma of Legal Practice with the College of Law in 2020 and was awarded the 2020 PLT Professional Excellence Award for the cohort. Chanelle was admitted to practice in the Supreme Court of Western Australia in November 2020 and to the High Court of Australia in January 2021. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
