Woolworths’ ‘Prices Dropped’ rules intended to prevent ‘gaming’ the promotional system, executive tells court | Consumer affairs
A senior Woolworths executive has defended relaxing rules designed to protect shoppers from misleading discounts by preventing supermarkets or suppliers from “gaming” the “Prices Down” promotional programme.
Woolworths’ chief commercial officer Paul Harker gave evidence on the second day of a landmark hearing between the Australian Competition and Consumer Commission and Woolworths in federal court on Wednesday.
The ACCC accused Woolworths of using its promotional scheme to disguise planned price increases with huge, short-term increases before dropping products to a so-called discounted price that was higher than the original shelf price.
Harker, who has worked at Woolworths head office since 2000 after starting as an in-store staff member in 1993, accepted under cross-examination that he had ultimate responsibility for the “Prices Down” programme.
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.
Additionally, the ACCC alleges Woolworths “breached” its own internal policies, known as “guardrails”, which set out how long a product must remain at a particular price before being offered for promotion.
The consumer regulator said Woolworths had relaxed guardrails that meant products had to be sold at one price for at least nine months before going on sale, reducing the costs required. a period of up to six months and then up to eight to 12 weeks.
Ultimately, the ACCC claims Woolworths changed its policy so that items could only be promoted at one price after three to six weeks – including under “Prices Dropped”.
Harker acknowledged Wednesday that the rules had been changed but said they were introduced in a low-inflation environment.
“As inflation continues to grow and grow and grow, we’ve revised those policies, moving away from a set of policies around managing team and supplier dynamics and toward what that actually means on the shelf for a customer,” he said.
“And so we arrived at our final ‘price confidence policy’ of three to six weeks.”
He told the court the longer price-setting period was designed to encourage long-term commitment to the scheme by discouraging suppliers from using cycling products.
“It was a deterrent for people to try to add and remove things from the program without a legitimate business case,” he said. “If you were, you wouldn’t be able to game the system.”
The aim of the guidelines was to protect consumers from misleading discounts by ensuring that products are sold at a consistent price for a reasonable period of time before being offered for sale.
How long Woolworths included and opted out of products in its ‘Prices Dropped’ scheme is at the heart of this case, as the ACCC alleges the supermarket deliberately used a short window to make products appear cheaper once they were put on sale again.
The 266 items identified by the ACCC were sold at one price for 180 days or more before prices were increased by at least 15%; but this only occurred for 45 days or less.
Woolworths then placed products in its “Prices Down” promotion at a price higher than or equal to the initial long-term price, and in many cases negotiated different pricing tiers with suppliers well in advance.
