Woolworths used ‘subtle magic’ to mislead consumers: ACCC
The Federal Court heard Woolworths’ strategy of communicating the prices of products used “subtle magic” to mislead shoppers into thinking pantry prices were getting cheaper when they were not.
On Tuesday morning, the blockbuster trial began in Sydney, with the Australian Competition and Consumer Commission (ACCC) accusing Woolworths of “misleading” discounts. The Watchdog’s lead lawyer, Michael Hodge KC, laid out the case focusing on the supermarket’s “Prices Down” program and examining prices. Pricing trajectories of 12 sample products such as Tim Tams and washing powder.
The two-week hearings follow a related ACCC case against Coles in February. Although this case concerns Coles’ “Down Down” special programme, both supermarkets defend similar claims that they are effectively mimicking discounts.
Supermarket giants have been accused of misleading consumers by artificially increasing the price of a product for a short period of time, with the intention of lowering it later, and advertising it as a comparative discount, even though the discounted price was higher than the normal price at which it was sold before the short-term increase.
Hodge, nicknamed the “baby-faced assassin” for cross-examining senior financial services executives at the banking royal commission in 2018, opened the ACCC’s case by explaining the difference between three types of shelf labels that Woolworths used to advertise hundreds of pantry staples on its Prices Down programme.
He argued that while standard “white ticket” prices indicate a regular shelf price and “yellow tickets” stand out and suggest a temporary, special savings, the red and white design scheme of the labels used to advertise products on the “Prices Down” site communicates something different to shoppers.
Hodge argued that “Prices Dropped” labels benefit from attracting shoppers’ attention by displaying a “previous/now” price comparison that indicates a second, higher price, and that the color scheme references regular white labels.
“This sends the message to the consumer that Woolworths has done something notable or unusual, it has reduced the regular shelf price,” Hodge said.
“The subtle magic of the ‘Prices Down’ message that attracts the consumer is to say that the new, stable price is lower [than the previous regular price]he said.
Earlier in Tuesday’s hearing, Judge Michael O’Bryan interrupted Hodge to suggest the ACCC had set up a “straw man” and was not responding directly to Woolworth’s case.
O’Bryan’s questioning mirrored the tone of the response given by ACCC lawyers when they launched proceedings against Coles in February. Specifically, O’Bryan believes Hodge’s opening statement on Tuesday assumed that shoppers did not believe the mid-to-high price before the “Prices Are Down” special was a real price.
O’Bryan questioned whether consumers who are often in a rush when shopping will “over-intellectualize” the information conveyed on pricing tickets.
Hodge pushed back: “There is a significant risk of ‘over-lawyering’ on this issue.” He said one of the things shoppers would understand from the “Prices Down” tag was that “it’s something special.”
Hodge also raised the price of a family pack of Oreo to show off the ACCC’s stance. The price of biscuits was $3.50 for almost two years, then increased by 43 percent to $5 for 22 days before being put on the Prices Down program to $4.50. He claimed they paid a dollar more than the previous month, even though the customer was told it “was” $5.
This week and next week, the watchdog’s legal team will call 11 Woolworths executives as witnesses and question them about how the supermarket giant determined the changing shelf prices of 12 products between September 2021 and May 2023.
Woolworths launched its “Prices Down” program in 2015. This program kept products at discounted prices for a minimum of 12 weeks and a maximum of six months or longer. Included items are marked with red and white shelf tickets displayed in-store and online, with the “before” price listed alongside the “sale” price.
Although the hearings will focus on 12 sample products, court documents released on the eve of a landmark hearing show that 265 of the 276 products presented in the initial claim were sold in higher quantities under the “Prices Down” program than during the previous 180-day period.
In 254 of these cases, the prices and supplier financing behind the red and white tickets were planned before the temporary price increase began, according to agreed facts between Woolworths and the consumer watchdog.
The Business Briefing newsletter delivers big stories, exclusive news and expert insights. Sign up to receive it every weekday morning.
Elias Visontay is the National Consumer Affairs Reporter for The Sydney Morning Herald and The Age.Connect via email.
