Australia sues grocery giants Woolworths and Coles over 'illusory' discounts
Discount prices were higher than original prices, watchdog says
Woolworths, Coles could face fines of up to 30% of turnover
Woolworths says it is studying claims
Coles says it will defend case
Updates shares, adds analyst comment and background on Woolworths, Coles in paragraphs 10-12
By Byron Kaye and Ayushman Ojha
Sept 23 (Reuters) -Australia's consumer watchdog accused the country's two largest supermarket chains of misleading shoppers about discounts on hundreds of products in lawsuits filed on Monday, tightening pressure on the sector amid a cost-of-living crisis.
The legal action marks a major move against the supermarket giants, which have faced scrutiny from lawmakers and regulators for hitting consumers with high prices at a time when interest rates, housing costs and energy bills have also risen sharply.
In separate lawsuits, the Australian Competition and Consumer Commission said Woolworths WOW.AX and Coles COL.AX held prices steady on certain products for up to two years, then hiked them only to advertise them as being on sale soon after.
The purported sale price was higher than the original price, the lawsuits said. The companies in some cases intentionally put up the prices for the purpose of establishing a higher "was" price, the suits said.
"The price discounts as promoted were misleading because the discount was illusory," the commission's chair, Gina Cass-Gottlieb, told reporters, adding it affected millions of units of products.
The commission said it was seeking unspecified penalties but noted potential fines for breaches of consumer law were A$50 million, 30% of turnover over the period of wrongdoing or three times the amount the company benefited from the wrongdoing.
The penalty "has to be high enough to be not a 'cost of doing business', to deter them from this conduct in the future and deter all retailers from this manner of conduct", Cass-Gottlieb said.
Shares of Woolworths and Coles, which together ring up two-thirds of Australian grocery sales, fell as much as 4% after the announcement.
Woolworths said in a statement it will review the commission's claims, while Coles said it would defend the case.
Jefferies analyst Michael Simotas said it was hard to predict the outcome of the cases, but said the penalties could be significant.
"We expect this matter to add to the pressure on major supermarkets' consumer perception and continue to be compounded by sales leakage to non-traditional channels," he said.
The current CEOs of both companies started after the period targeted by the watchdog's lawsuit, September 2021 to May 2023. In an April 2024 senate hearing, Woolworths then-CEO Brad Banducci said shoppers would go elsewhere if his company engaged in price gouging.
The centre-left Labor government, which must go to an election within a year, has faced pressure from political opponents to introduce laws giving the regulator power to break up the supermarket companies, but has ruled out break-up powers.
($1 = 1.4684 Australian dollars)
Reporting by Byron Kaye and Alasdair Pal in Sydney, and Ayushman Ojha in Bengaluru; Editing by Himani Sarkar, Rashmi Aich and Sonali Paul
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