ACCC Alleges Woolworths Misled Customers with 'Prices Dropped' Promotions; Court Adjourns Without Verdict

ACCC Takes Woolworths to Court Over "Illusory" Discounts

The Australian Competition and Consumer Commission (ACCC) has initiated Federal Court proceedings against Woolworths, alleging the supermarket chain misled customers through its "Prices Dropped" promotional program between September 2021 and May 2023. The case, heard before Justice Michael O'Bryan, involves allegations that Woolworths temporarily raised prices on hundreds of products before promoting them as discounted. Woolworths denies the allegations. The hearing has concluded, and judgment is pending.

The ACCC argues that Woolworths planned these price increases and subsequent promotions in advance, often negotiating the different pricing phases with suppliers simultaneously.

ACCC Allegations

The ACCC alleges that Woolworths contravened Australian Consumer Law by making false or misleading representations through its "Prices Dropped" program. The regulator claims that the supermarket temporarily increased prices on at least 266 products for short periods—typically 45 days or less and by at least 15%—before placing them on promotion under the "Prices Dropped" label.

According to the ACCC, the promoted discounted price was often equal to or higher than the product's original long-term price before the temporary increase. The regulator contends this practice prevented shoppers from making informed choices and constituted "illusory" discounts.

Woolworths' Defense

Woolworths denies any wrongdoing, stating that its "Prices Dropped" prices were genuine and not illusory. The company argues that the price labels were factually accurate because the promoted price had been reduced from the immediately preceding higher price.

Woolworths maintains that consumers are aware of rising costs due to inflation and expect prices to fluctuate.

Woolworths attributes necessary price increases to supplier cost hikes during a period of high inflation following the COVID-19 pandemic. The company states that the previous, lower prices were "pre-inflationary" and no longer relevant.

The company's legal team, led by Robert Yezerski SC, challenged the ACCC's interpretation of Woolworths' internal pricing policies and stated that the company takes ACCC guidance seriously. Woolworths provided evidence that products had been sold in significant quantities at the higher prices before promotion and that suppliers had requested cost increases in almost all cases.

Internal Policy Breaches

During the trial, Woolworths managers acknowledged breaches of the company's internal pricing policies, known as "guardrails," which required products to be sold at a higher price for a minimum period before being placed on promotion.

• Barry O'Leary, a merchandise manager, admitted that Oreo Family Packs were sold at $5 for only three weeks (November 28 to December 20, 2022), instead of the required four-week establishment period, before being promoted at $4.50. O'Leary called this an "error."

• Callum Davies, a commercial pricing manager, acknowledged that a 2kg Fab laundry powder was priced at $14 for 19 days—below the required four weeks—before being reduced to $8 on the "Prices Dropped" program. Davies agreed that the $14 price was not intended to be permanent and was set to establish a higher reference price for the discount.

Key Product Examples

The court examined pricing histories for 12 representative products, including:

Witness Testimony

Paul Harker, Woolworths' chief commercial officer, testified that he had ultimate responsibility for the "Prices Dropped" program. He stated that internal policies were revised as inflation grew, moving from longer price establishment periods to shorter ones. Harker said the original, longer periods were designed to discourage suppliers from frequently cycling products on and off the program without legitimate commercial justification.

Sam Woodcock, a senior manager, conceded that price hikes and subsequent discounts were pre-planned at suppliers' requests and that non-compliance risked losing products from shelves.

Cormac Deery, commercial director of non-food groceries, testified that the high-inflation environment led to a surge in supplier cost increase requests, making the "Prices Dropped" program settings unpredictable. He described a cost price increase from Arnott's as "a joke" and "laughable" in internal emails, though he stated this comment referred to a separate proposal.

Related Case Against Coles

The ACCC also pursued a similar case against Coles regarding its "Down Down" promotional program. In a separate judgment, Justice Michael O'Bryan ruled that Coles had misled customers through 13 out of 14 sample product labels.

Justice O'Bryan stated that a minimum period of 12 weeks at the higher price would have been required to avoid misleading consumers.

The court found that Coles increased prices on hundreds of products for short periods—typically four weeks—before offering them at a lower "Down Down" price. The Coles case concluded in February. Penalties are yet to be determined. Coles is reviewing the judgment and may appeal.

Class Actions

Two law firms have registered consumers for class actions seeking compensation related to Woolworths' and Coles' promotional practices:

• GMP Law (Gregory Mackey, Special Counsel): Approximately 50,000 consumers registered. Mackey suggested impacted customers could receive between $200 and $1,300, depending on spending patterns.

• Carter Capner Law (Peter Carter, Director): Over 30,000 consumers registered. Carter estimated households could claim between $2,000 and $5,000.

If the court finds in favor of the ACCC, that finding would determine Woolworths' liability in the class action claim. GMP Law noted that regulatory penalties are paid to the government and do not automatically return money to consumers.

Potential Penalties and Implications

If Woolworths loses the case, potential consequences include civil penalties, reputational damage, and a class-action payout to shoppers. Each misleading promotion carries a maximum penalty of $50 million. The current record penalty for breaching consumer law in Australia is $125 million (Volkswagen, 2019).

If Woolworths wins, it would represent a vindication of its pricing strategy and could challenge the ACCC's credibility.

The outcome of both cases could influence how retail discount pricing is conducted across the Australian supermarket sector. Coles and Woolworths together account for nearly two-thirds of the Australian grocery market.

Post-Litigation Actions

Woolworths discontinued the "Prices Dropped" program in December 2024 after learning of the ACCC's legal action. The company has replaced it with another discounting strategy promising lower prices for longer periods. Coles has maintained its "Down Down" program.

In a related development, the Australian government has announced a ban on "excessive pricing of groceries" effective July 1, 2025, prohibiting large retailers from charging prices that exceed the cost of supply plus a reasonable margin. The law applies only to retailers with revenue over $30 billion, which currently includes Coles and Woolworths.