Wed Apr 22

How court cases against Woolworths and Coles could change the future of shopping in Australia

Written by Jeannie Marie Paterson, Professor of Law (consumer protections and credit law), The University of Melbourne

The consumer watchdog’s Federal Court case ^[1] against Woolworths over its “prices dropped” promotions is underway and will run into next week.

This – and a separate court action against Coles ^[2] – are crucial legal cases, with the potential for hundreds of millions of dollars in fines.

Around two-thirds of all Australian supermarket sales ^[3] are made at Woolworths or Coles. So most Australians are likely to have seen some of the disputed “discounts” being fought over in these cases.

Together, these cases will decide the line between unlawful trickery versus legitimate marketing tactics in how every retailer sells products to Australians.

‘Illusory’ or real discounts?

If you followed the Coles “down down” discounts trial ^[4] in February, the underlying complaint in the current Woolworths case will feel familiar.

The Australian Competition and Consumer Commission (ACCC) alleges both supermarket giants misled shoppers over discounts on hundreds of items.

Interestingly, day one of the Woolworths case ^[5] on Monday suggests the ACCC intends to run this court case a little differently. Instead of spending time on what the supermarket’s strategy was, as in the Coles case, the ACCC cut straight to its core argument about misleading consumers.

The current Woolworths case is focused on a bundle of 12 everyday products ^[6], selected from a longer list of 266 ^[7] raised by the ACCC. Those products include Tim Tams and Tiny Teddy biscuits, Fab laundry powder and Kleenex Aloe Vera tissues.

The ACCC argues ^[8] that after these products had been at a stable price for at least 180 days or more (excluding short fluctuations), Woolworths temporarily raised the price for 45 days (or less) by at least 15%.

Then it dropped the price below the recently raised price and labelled it as “prices dropped” – even though that cost was more, or at least as much, as the previous long-running price.

The ACCC calls those marketed discounts “illusory”.

A Woolworths label showing prices dropped from $5 to $4.50 for Oreos biscuits

One of the examples of ‘prices dropped’ discounts in the Woolworths case. ACCC

Woolworths denies this ^[9], arguing its “prices dropped” labels were literally true: the price of a pack of Oreos biscuits really was $5 the month before, before it was “dropped” to $4.50.

The ACCC has pointed out those Oreos cost $3.50 ^[10] before the price rise.

In court on Monday, Woolworths’ barrister Robert Yezerski SC focused ^[11] on the supermarket’s defence that rising costs had forced up prices ^[12] – and Australian shoppers recognised that: “They know what is happening in the economy, and they are indeed expecting prices to rise.”

So the Federal Court will have to decide whether an average supermarket shopper thought Woolworths’ “prices dropped” discount ticket meant dropped from a long-term price, or dropped from an always fluctuating price.

What if the supermarkets win?

Closing its court case in February, Coles said ^[13] the ACCC hadn’t provided any evidence to prove “ordinary reasonable consumers” had understood its “down down” discounts meant the new price was lower than a past “regular” price (as opposed to the most recent past price).

If the Federal Court accepts the supermarkets’ arguments that consumers expected prices to change because of inflation, and that their discount tickets were strictly true, it would be significant.

It would send a message that while marketing has to be factually correct, consumers should understand that prices always fluctuate, so promoted discounts are just a point-in-time price.

In other words, shoppers would need to keep a closer eye on prices day to day.

Huge fines if the ACCC wins

An ACCC win would mean every major Australian retailer – not just supermarkets – needed to review their discount strategies.

It would mean Australian Consumer Law ^[15] applied more strictly in future, ensuring the whole impression presented by a discount ticket was accurate.

The loss would also be backed up by considerable penalties, possibly reaching hundreds of millions of dollars for each supermarket.

The supermarkets’ alleged contraventions took place in 2021–22 ^[16]. During that time, penalties under Australian Consumer Law rose from a maximum of A$10 million per contravention, to the greater of $50 million, three times the benefit obtained, or 30% of adjusted turnover during the breach period per contravention – for every product and every promotion.

The ACCC has made clear it is seeking a “significant penalty ^[17]” if it wins, plus community service orders funding meal-delivery charities.

Whichever way this judgment lands, two class actions ^[18] representing consumers are already waiting in the wings.

Setting rules for truth in advertising

A decade ago, the ACCC took on both supermarkets over allegations of unconscionable treatment of suppliers. Coles settled its case ^[19] and paid a penalty of $10 million. But Woolworths went to court and won; its conduct was deemed “not unconscionable ^[20]”.

Despite those different outcomes, the court cases did have an impact. They led to the introduction of a binding Food and Grocery Code of Conduct ^[21], which came into effect in 2025. It aims to promote good faith bargaining by supermarkets and protect suppliers if they insist on their legal rights.

There is no date yet for when we’ll have the judgments on the Woolworths and Coles cases, both being heard by Justice Michael O'Bryan.

His judgments will effectively set the rules for what “truth in advertising” means for every retailer in the country in the future.