Supermarket discounts: How special are specials?

We have all fallen for supermarket discounts, from ‘buy one, get one free’ inducements to promises of ‘everyday low prices’, but just how special are those specials?

The Australian Competition and Consumer Commission (ACCC) has argued that, in many cases, not only are the specials advertised at Coles and Woolworths not that special but that consumers have been deliberately misled.

In a landmark ruling on 14 May, the Federal Court agreed, finding that Coles had misled shoppers on 13 of 14 ticketed items submitted to court as part of the ACCC’s legal action against the supermarket chain.

Judge Michael O’Bryan said that the discounts on these items, advertised as part of Coles’ Down Down campaign, were not genuine and would have misled an ordinary customer.

The decision could have far-reaching effects for consumers and retailers, with the ACCC hailing it as a win for transparency, while others warned the ruling could make it harder for shoppers to get a good deal.

While Coles is still to indicate whether or not it will appeal, the supermarket faces the prospect of hefty fines – up to $50 million per breach. Woolworths is also awaiting the court’s verdict over similar allegations.

ACCC chair Gina Cass-Cottlieb said the regulator would be seeking substantial penalties to reflect the importance of accurate pricing for consumers.

“It is very important that a penalty is not just able to be dismissed as a cost of doing business, and that it comes at a level that is a significant deterrent for such conduct,” she said.

 

 

The ups and downs of pricing

The ACCC watchdog launched legal proceedings against Coles and Woolworths in late 2024, accusing them of breaching Australian Consumer law with illusory discounts on more than 500 products.

The case against Coles was heard in Federal Court in Victoria in February, with ACCC legal counsel Garry Rich accusing the supermarket chain of deliberate and misleading tactics to trick shoppers with its Down Down promotions.

The case against Woolworths was heard in Sydney in late April and early May, with Judge O’Bryan expected to hand down his verdict later this year.

The ACCC said the competition between the two supermarket giants, which it argues are the most profitable in the world, was “a race to the bottom”.

The watchdog claimed the supermarkets made false representations about prices in a strategy known as “was/is” pricing. The cost of items is temporarily raised so that the supermarket can then mark them “Down Down” for a sales promotion.

In one of many examples shown to court, dog food was priced at $4 for 296 days, then lifted to $6 for just seven days before being listed as “Down Down” to $4.50, more expensive than the original price.

In another, baby formula was sold at $18 for 794 days then increased to $24 for 23 days, before being knocked “Down Down” to $21. The ACCC argued that shoppers would feel misled if they knew that the price had only been $18 four weeks before.

 

 

Timing is everything

That timing has brought Coles undone, with Judge O’Bryan saying the Down Down sale items would not have been an issue if the products had been sold at the “was” price for a minimum of 12 weeks.

“I have concluded that 13 of the 14 Down Down tickets... were misleading because the relevant products were not sold at the “was” price stated on the ticket for a reasonable period and as a consequence the discount represented on the tickets was not genuine,” he said.

Coles had updated its own guardrails, the amount of time it set a product at a higher price before discounting, in January 2022, effectively creating a price establishment period of 12 weeks.

But in March 2022, feeling the pressure from main competitor Woolworths, the supermarket reduced these to four weeks.

While Coles admitted that it had broken guardrails on two products, the supermarket chain said this was due to mistakes rather than a planned campaign. Coles counsel John Sheahan said it was important to remember that “all prices are temporary – nothing lasts forever”.

 

 

Confusion over pricing

Illusory discounts are far from the only issues the ACCC has with supermarket pricing. The court action comes on the back of a long-awaited supermarket inquiry, the first in 16 years, which found that promotional practices made it difficult for consumers to know if they are getting value for money.

The ACCC recommended a raft of changes, including greater transparency around pricing and supermarket promotions.

Have you ever picked several things off the shelf based on the 'special’ or ‘discount’ tag next to it, only to see a different price come up as you’re scanning the item? You’re not alone.

Consumers also complained about price discrepancies between in-store items and what is advertised online, and online ‘sales’ prices not actually being on sale at all.

It doesn’t help that supermarket tags bear a dizzying array of terms that make you believe you are getting a bargain. A Choice survey found that one in four people were confused about supermarket discounts. A ‘low price’ tag, for example, might make you think it’s on sale when in fact the supermarket has just decided it’s a good deal. Labels like ‘prices dropped’ are often used without any indication of when, if at all, that happened.

   

The rise of shrinkflation

Consumers are also being short-changed in other ways. If the price of an item doesn’t go up, but the product’s size decreases, you are still paying more for less. This is known as shrinkflation and, despite the supermarkets’ denials, regular grocery shoppers say the practice is widespread.

Shrinkflation was a major concern for those who responded to the ACCC inquiry, with the watchdog recommending that supermarkets be compelled to tell consumers when package size changes to their detriment by:

• • Providing information about the previous and current unit price
  • Publishing this near the pricing ticket on the shelf and online
  • Publishing this for a set time so shoppers can be made aware of it

Treasurer Jim Chalmers also confirmed the Federal Government was overhauling the Unit Pricing Code, which requires retailers to show the unit price of an item (such as per kg or litre) to help shoppers decide if they are really getting a bargain. Mr Chalmers said strengthening the code would help combat “sneaky shrinkflation that drives people crazy”.

 

 

Finding the real specials

Grocery shopping is enough of a chore without having to worry about whether supermarket discounts are the real deal. The Coles decision is a reminder that you are entitled to clear, honest pricing.

While retailers can raise prices for legitimate reasons, they should not use a short-lived higher price to make a reduction look like a real saving.

Coles could pay dearly for its not-so-special specials. And with the decision about Woolworths’ discount practices still to come, all retailers will be thinking twice about how they advertise sale items.