The Australian Competition and Consumer Commission (ACCC) has levelled serious allegations against Woolworths, accusing the supermarket giant of employing promotional tactics to conceal planned price increases. This case, now unfolding in the federal court, centres on the 'Prices Dropped' program, which the consumer watchdog claims was manipulated to mislead shoppers.
Executive Defends Rule Changes Amid Inflation Pressures
On the second day of the landmark trial, Paul Harker, Woolworths' chief commercial officer, provided testimony defending the relaxation of internal policies designed to prevent 'gaming' of the promotional system. Harker, who has been with Woolworths since 1993, acknowledged his ultimate responsibility for the 'Prices Dropped' program but argued that rule adjustments were necessary in a changing economic landscape.
'As inflation continued to grow and grow and grow we revised these policies,' Harker stated in court. He explained that the shift was from managing team and supplier dynamics to focusing on customer impact at the shelf, leading to the adoption of a new 'price trust policy' requiring products to be priced consistently for just three to six weeks before promotion.
Allegations of Deceptive Pricing Practices
The ACCC alleges that between September 2021 and May 2023, Woolworths temporarily increased prices on at least 266 products by at least 15% for periods of 45 days or less. These items had previously been sold at a stable price for 180 days or longer. Subsequently, Woolworths placed them on 'Prices Dropped' promotions at prices equal to or higher than the original long-term price, creating an illusion of discounting.
According to the ACCC, this practice involved 'marketing magic' intended to trick customers into believing they were securing bargains when, in reality, they were paying more or the same as before. The consumer regulator further contends that Woolworths contravened its own internal 'guardrails,' which initially mandated products remain at a set price for nine months before promotion. This timeframe was allegedly reduced to six months, then eight to twelve weeks, and finally to just three to six weeks.
Internal Policies and Consumer Protection
Harker testified that the original longer price establishment period of nine months was designed to discourage suppliers from cycling products on and off the program without legitimate commercial justification. 'It was a disincentive for people to try to move things on and off the program without a legitimate commercial justification,' he said. 'If you were, you couldn't game the system.'
The guidelines aimed to protect consumers from misleading discounting by ensuring products maintained a stable price for a reasonable duration before being marketed as on sale. However, the ACCC argues that the shortened windows enabled Woolworths to artificially inflate prices briefly, then present them as discounted, thereby deceiving shoppers.
Broader Implications for Retail and Consumer Trust
This case highlights critical issues in retail practices and consumer protection. The duration products were cycled on and off the 'Prices Dropped' program is central to the allegations, with the ACCC asserting that Woolworths exploited short timeframes to create false perceptions of value.
Many of the 266 identified products had pricing phases negotiated with suppliers well in advance, suggesting premeditated strategies. The outcome of this trial could set significant precedents for how supermarkets and retailers manage promotions and pricing transparency in Australia.
As the proceedings continue, the focus remains on whether Woolworths' actions constituted deceptive conduct under consumer law. The ACCC's pursuit of this case underscores its commitment to policing unfair practices in the retail sector, aiming to uphold integrity and trust in consumer markets.
