Woolworths executives grilled over pricing review during ACCC probe

Woolworths executives testified before the Federal Court that its discount policies were being completely reviewed as ACCC inspectors closed in.

Australia’s consumer watchdog has accused Woolworths of breaching the Australian Consumer Law by misleading consumers with deceptive discount claims on 266 products in its stores.

The ACCC alleges Woolworths misrepresented the prices of a range of grocery items, from Oreos biscuits to Friskies cat food to Nicorette patches, between September 2021 and May 2023, in the wake of the Covid-19 pandemic.

The supermarket giant is alleged to have temporarily increased the prices of products sold at a fixed price by up to 15 percent for at least six months.

The ACCC alleges Woolworths dropped the price shortly after placing the products in its Prices Dropped promotion and advertised the product as a savings deal; but the new discounted price remained the same or higher than the original price before the short-term increase.

Woolworths denies the accusation.

The legal battle continues in the Federal Court this week before Judge Michael O’Bryan, who presided over an almost identical case against Coles, heard it earlier this year.

In court on Thursday, Woolworths chief commercial officer Paul Harker said the supermarket giant became aware of the ACCC investigations in mid-2022.

“I don’t know if this was a genuine investigation or if he was just getting the initial inquiry from them (at the time),” Mr. Harker said.

In a September 2022 training document seen by the court and submitted by Mr Harker, team members were told to keep quiet about the “ACCC review” because it was “confidential”.

Mr Harker said around this time the organisation’s pricing policies were being reviewed.

“It makes you stop and think, look and review, just like you do when people ask questions,” he said.

The court was told an updated pricing rules document was due in September 2022.

“The purpose of the code is… (to ensure that the team knows what they should or should not do when managing pricing programs at Woolworths),” Mr Harker said.

ACCC barrister Michael Hodges KC argued that Woolworths interpreted the “previous” price (the standard, higher shelf price before a product is discounted) as being different between yellow ticket Specials and Drop Prices.

“I don’t think so,” Mr. Harker replied, but did not offer an explanation of how each “was” price was determined or why it differed between the two pricing programs.

Sam Woodcock, Woolworths Everyday Value’s former head of pricing and current product manager for vegetables, told the court that some price increase decisions were made with the Prices Down program in mind.

Regarding negotiations for Carmen’s 12-pack fruit and nut muesli bars, it was initially proposed to increase the suggested retail price from $10 to $11 in order to re-enter the Dropping Prices program at a slightly discounted price.

Mr Woodcock said at the time that Carmen accepted the cost price increase as a “bargaining tactic” and without accepting the promotional offer to ensure the product remained on shelves.

In internal communications referred to in Mr. Woodcock’s affidavit, he said he would accept the cost increase and “wait for the money to drop” regarding Carmen’s need to include themselves in the Falling Prices program to remain competitive.

“The proposal was that the product would continue to Fall in Prices, and I think it would continue to Fall in Prices at that point,” he said.

More to come