Woolworths engaged in ‘marketing magic’ to trick customers, consumer watchdog tells court | Business
Woolworths used “marketing magic” to trick customers into believing they were getting genuine discounts as part of the supermarket’s “Prices Down” promotion, the consumer regulator told the court.
The landmark case between the Australian Competition and Consumer Commission (ACCC) and Woolworths began in the federal court in Sydney on Tuesday, almost two months after hearings in a similar case against Coles ended.
The ACCC alleges that Coles and Woolworths broke Australian consumer law by offering “misleading” discounts on hundreds of everyday items by misleadingly using their respective “Down Down” and “Prices Down” promotional programmes.
In his opening statement to the ACCC on Tuesday, Judge Michael O’Bryan pressed the consumer watchdog’s lawyers on one of its key arguments.
The ACCC alleges Woolworths temporarily increased the prices of at least 266 items between September 2021 and May 2023 to make shoppers think they were getting a discount, and then applied them to “Prices Dropped” promotions.
The strategy is known as comparative or “upfront” pricing.
The third “discounted” price was in most cases higher than the original long-term price before the short-term price increase; The ACCC suggests this was a deliberate strategy to soften previously planned price increases.
Court documents show the items were sold at their original price for 180 days or more before prices were increased by at least 15%, but only for 45 days or less.
O’Bryan questioned whether the length of time items were sold at the second price and the increased price were relevant to the ACCC’s claim that Woolworths incorrectly advised customers they would receive a discount on the third price.
He said shoppers probably wouldn’t be able to analyze “past/past” prices on a product’s promotional ticket to that degree, and the ACCC’s case was based on “a level of analysis that consumers wouldn’t consider”.
“Whether the savings…are real may depend on a number of factors, including the period. [of time] “It includes what the ‘was’ price is in the market, but also how the ‘was’ price is determined,” he said.
O’Bryan asked similar questions to the ACCC in the case against Coles in February. On Tuesday, the watchdog’s attorney, Michael Hodge, backtracked.
Hodge said consumers “at least” understand “very simple” concepts, including that a “Prices Down” label means the regular long-term price of a product has actually dropped.
“This sends the message to the consumer that Woolworths has done something notable or unusual, it has reduced the regular shelf price,” Hodge said.
He described the strategy as “subtle magic” and “marketing magic.”
He presented the court with the example of an Oreo family pack that had an initial price of $3.50 for nearly two years, then rose 43% to $5 over 22 days before being placed on the Falling Prices program at a price of $4.50.
The new ticket for the product told consumers that while the packet of biscuits “was” $5, they paid a dollar more than the previous month.
“If they had compared this price history with what was communicated to them in the product, they would have formed an opinion that the ticket was misleading or inaccurate,” he said.
The agreed statement of facts between the ACCC and Woolworths shows the supermarket frequently negotiated with suppliers to offer “discounts” on products and also agreed to increase its prices.
In 265 cases the pre-planned “Prices Down” price was more expensive than the long-term price of the products before the price increase, and in 11 cases it was the same price.
Of the 245 products identified by the ACCC, Woolworths and the supplier had previously agreed the final “discounted” price of the product before the products were temporarily inflated.
For 232 products, suppliers bore at least some of the financial burden of having their products included in the “Prices Down” program, reducing profit margins.
Woolworths has phased out its “Prices Down” scheme by the end of 2024.
