Australian shoppers expected grocery prices to rise in the post-pandemic era, Woolworths has claimed as it downplayed allegations that items the chain labelled as discounted had not genuinely become cheaper during that period.
The supermarket’s barrister made the claim on the first day of a blockbuster case in which the Australian Competition and Consumer Commission (ACCC) is accusing Woolworths of offering “illusory” discounts via its “Prices Dropped” program.
Woolworths is accused of misleading consumers by artificially increasing a product’s price for a short period, then lowering it and advertising it as a discount, despite the new price being higher than the regular price it was sold at before the brief spike.
Across this week and next, the ACCC’s legal team – led by barrister Michael Hodge, KC – will call 11 Woolworths managers as witnesses to question them about how the supermarket giant decided to shift shelf prices of 12 items such as Tim Tams and laundry powder between September 2021 and May 2023.
On Tuesday afternoon, Woolworths’ lead barrister Robert Yezerski, SC, described the inflationary environment gripping shoppers and the broader economy at the time. “They know what is happening in the economy, and they are indeed expecting prices to rise,” Yezerski said.
The two weeks of hearings follow a related matter the ACCC put to court against Coles in February. While that case relates to Coles’ “Down Down” specials program, both supermarkets are defending allegations that they in effect faked discounts.
Hodge – nicknamed the “baby-faced assassin” for his time cross-examining senior financial services executives in the 2018 banking royal commission – opened the ACCC’s case by explaining the difference between three types of shelving labels that Woolworths used when advertising hundreds of pantry staples as being on its “Prices Dropped” program.
He argued that while standard “white ticket” prices indicated a regular shelf price, and “yellow tickets” stand out and suggest a temporary, special saving, the red-and-white design scheme of the labels used to advertise products on “Prices Dropped” communicated something different to shoppers.
The “Prices Dropped” labels benefit in attracting shoppers by displaying a “was/is” price comparison pointing to the second, higher price, and its colour scheme nods to the regular white labels, Hodge argued.
“The subtle magic of the ‘Prices Dropped’ message that draws the consumer in is to say the new, stable price is lower [than the previous regular price],” he said.
But Justice Michael O’Bryan interrupted Hodge’s submissions repeatedly, at one stage suggesting the ACCC was setting up a “straw man” and not directly responding to Woolworths’ case. O’Bryan questioned if consumers, who are often in a rush when shopping, would “over-intellectualise” the information conveyed on pricing tickets. Hodge pushed back, saying one of the things shoppers would absorb from the “Prices Dropped” label is that “there is something special”.
O’Bryan’s questioning echoed the tone in which he responded when the ACCC’s lawyers laid out its case against Coles in February.
Hodge also raised the pricing of a family pack of Oreos to illustrate the ACCC’s case. The biscuits’ price was $3.50 for nearly two years, was hiked 43 per cent to $5 for 22 days before being placed on the Prices Dropped program at a price of $4.50. Although the customer was being told it “was” $5, they were paying a dollar more than the month before, he claimed.
At the crux of the case is how long a product has to be at a higher price before a discount becomes genuine. O’Bryan referred to a 2020 ruling that the online electronics retailer Kogan misled customers when it offered 10 per cent tax-time discounts on products immediately after increasing their prices by the same amount or more.
O’Bryan said he had “never understood Woolworths’ case to be … [that] if the product was at that price for one day, that would be legitimate”, but he did not say how long a price had to be available before it became genuine.
Hodge concluded shortly before the court adjourned for lunch, with Woolworths’ legal team getting a brief opportunity to begin their defence. Yezerski seized on the concerns O’Bryan had aired during the ACCC’s opening arguments to submit that the regulator was relying purely on what the tickets implied, not what was explicitly written on them. “The ACCC does not suggest that any information on the Prices Dropped ticket was inaccurate,” Yezerski said.
Woolworths introduced the “Prices Dropped” program in 2015. It kept products at discounted prices for at least 12 weeks, and up to six months or longer. Included products were marked by red-and- white shelf tickets, displayed in store and online, with the “dropped” price alongside a “was” price.
While the hearings will focus on 12 sample products, court documents published on the eve of a landmark trial show that of 276 products filed in the initial claim, 265 had been sold under the “Prices Dropped” program for amounts that were higher than they had been for a previous 180-day period.
In 254 of those cases, prices and supplier funding behind the red-and-white tickets were planned before the temporary price spike had begun, according to the statement of agreed facts between Woolworths and the consumer watchdog.
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Elias Visontay is a National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect via email.