The Australian Competition and Consumer Commission (ACCC) has sent a shot across the bows of retailers using discount pricing claims on long-term prices that remain the same for many months.

In brief

The ACCC commenced Federal Court proceedings on 23 September against Coles and Woolworths alleging that the two major supermarket have misled consumers by using their “Down Down” and “Prices Dropped” pricing claims in cases where the prices were actually higher than, or the same as, the previous regular price.

In depth

The Marketing context

Coles and Woolworths have for many years used their “Down Down” and “Prices Dropped” marketing  messaging to signal to consumers, in a highly competitive retail market, that the price they are paying today for hundreds of products is less than what they would have paid months – and in some cases up to a year – ago. That’s a compelling message: in a cost-of-living crisis  prices have been dropped and reductions maintained at the lower level.

The ACCC complaint

The ACCC has previously challenged was/now pricing where the product being promoted was either never sold at the “was” price or was available at the “was” price for a limited time before being “discounted”. In a string of cases, the Federal Court has found in favour of the ACCC that using was/now pricing in this way misleads consumers into believing that they are saving money, when those savings are illusory.

The ACCC’s claim against Coles and Woolworths is that they did something similar to this.

The regulator is alleging that Coles and Woolworths periodically increased prices by up to 15 per cent for brief periods before dropping the price to either the prior regular price, or sometimes even to a higher price than the prior regular price and promoting  products using their “Down Down” or “Prices Dropped” claims. The ACCC says consumers were misled into believing that they were being offered a saving when in fact the new price was actually higher than or the same as the previous regular price.

The ACCC also alleges that in many cases Coles and Woolworths had already planned to later place the prices on a “Down Down” or “Prices Dropped” promotion before the price spike, and that the temporary price hike was a device to establish a new, higher “was” price on hundreds of goods.

The ACCC is seeking declarations, penalties and costs orders for alleged breaches of ss 18 and 29 (1)(i) of the Australian Consumer Law; as well as orders that Coles and Woolworths each fund a charity to deliver meals to Australians in need.

What you need to know

Was/Now pricing is a legitimate marketing strategy. However pricing claims risk being found to be misleading if the claimed savings are in fact illusory. The ACCC claim against Coles and Woolworths will test the using of was/now pricing for long-term discount claims.

The ACCC claim also highlights the potential significance of internal communications about pricing and other marketing strategies when the conduct of a retailer come under scrutiny.