Coles and Woolworths’ Questionable Pricing Tactics Revealed by New Investigation

In December 2022, inflation hit a thirty-year high at 7.8 per cent. Very quickly, we saw the results of this, which was pretty much everything rising in price. In particular, groceries. But the exponential rise of food prices at Coles and Woolworths had customers asking whether there was something more than just inflation at play. Were we all being price gouged by the supermarket chains?

We’ve certainly seen some interesting tactics from the supermarket giants of late, like members-only pricing at Woollies and body cameras at Coles. Not to mention we’ve seen them earn record profits. Could this be a result of price gouging – ie. raising the prices of something that is beyond what is reasonable or fair?

It’s become the subject of a parliamentary inquiry and investigations from the Australian Competition & Consumer Commission (ACCC). Let’s break down what the latest is on suspected supermarket price gouging.

What is happening with supermarket price gouging in Australia?

To start, one thing to know about price gouging in Australia is that it’s not technically illegal. As the ACCC defines on its website:

“People may consider the prices a business charges to be too high. This is sometimes referred to as ‘price gouging’ or ‘excessive pricing’. Sometimes businesses may respond to a sudden rise in demand or lack of supply with very large price increases.”
“While it’s often seen as unfair, prices or price increases that people may think are too high are not illegal on their own. However, it’s illegal for businesses to make false or misleading claims about prices, including the reason for price increases.”

When questioned about profits in front of a parliamentary committee in July 2023, a Woolworths spokesperson said profit margins were low. However, they were talking in reference to the company as a whole, which also includes Big W. As The Guardian pointed out, when looking at solely the supermarket component of Woolies and Coles, profits have jumped during the cost-of-living crisis.

The numbers don’t add up on the supply end either, with farmers losing money despite the price points of their items on the consumer end rising.

“There should be an inquiry [into] why food is so dear, when actually we dump more than we’re selling at the moment,” Trevor Cross, a farmer in Bundaberg, told the ABC.

A report by former ACCC chair Professor Allan Fels was published on February 7, which investigated price gouging and took aim at several of Australia’s biggest brands.

For starters, Fels confirmed that the prices we’re currently seeing are beyond normal inflation, with companies partaking in exploitative practices:

“There is currently a gap in government policy. It does not pay sufficient attention to high prices. It needs to. It needs to investigate and expose their causes and, as far as possible, remedy the problems: ineffective competition, vulnerable consumers, and exploitative business pricing practices.”

Fels’ report singled out the lack of competition and price-pushing efforts from Australia’s major energy companies, big banks, supermarkets and airlines. He outlined 35 recommendations the government should adopt to remedy this situation, including lawfully requiring the ACCC to conduct more price and market investigations (and giving them the power to do so), and creating a new Commission on Competition and Prices to investigate government and other restrictions on high prices caused by lack of competition. Fels also made specific recommendations for aviation, early childcare and education, banking, energy, food and groceries, shipping, electric vehicles and pharmaceuticals sectors.

You can read more from the report here.

Another update in this space has come from a Four Corners investigation, which revealed leaked emails that prove Coles and Woolworths have been profiting off of rising prices.

According to the email, a multinational supplier approached Coles about a price increase of around 5 per cent to help it cover rising costs. A Coles buyer initially dismissed this request based on “customer needs”, but further negotiations led to the supplier making a one-off payment of $25,000 to help cover the “gap” that Coles would be losing by making the price increase. Following this, the source said Coles not only took the one-off promotional money but it passed on the price increase to customers.

The Four Corners investigation adds that the lack of competition between the two major supermarkets in Australia is leading to the inflation in prices. Julian Hilliard, a buyer who has worked at both Woolworths and Coles, told the ABC that while working for Woollies, he noticed that if Coles put up the price of an item, they would instantly match it.

“I would probably say that if you did five shops in Woolworths and five shops in Coles … you’d be a few cents difference maybe depending on the specials,” he said.

This, along with tactics like raising “locked prices” before their due date and installing “phantom brands” on shelves (ie. home brand items that do not clearly indicate they are owned by Coles or Woolworths anywhere on the packaging), are all reasons the supermarkets seem to be booming in profit, while consumers are struggling to pay for the essentials.

What is the government doing about it?

In December 2023, the Greens spearheaded a Senate inquiry into the major supermarkets, focusing on food prices, the pattern of pricing strategies and the inflations of profits during economic hardship.

On January 10, ahead of the inquiry, the Albanese government appointed Dr Craig Emerson to lead the 2023-24 review of the Good and Grocery Code of Conduct.

“We have been clear – if the price for meat and fruit and vegetables is going down at the farm gate then families should be seeing cheaper prices on supermarket shelves too. Supermarkets have a duty to make sure they’re providing affordable options for all Australians, especially when they’re making savings on their own costs,” Prime Minister Anthony Albanese, said in a statement.

It’s not just price gouging that is being investigated, with the ACCC taking a look at complaints that claim retailers are offering deceptive discounts, by increasing the price of an item shortly beforehand and then slapping a discount tag on it, therefore exaggerating the savings the consumer is making.

As our pals at Pedestrian TV have reported, the ACCC recently shared a statement on its focus on supermarket pricing.

“For some time now, we have been closely considering the reports received from consumers alleging false or misleading ‘was/now’ or other pricing ‘specials’ advertising by supermarkets, and whether they may raise concerns under the [Australian consumer law],” an ACCC spokesperson said in a statement.

“[The ACCC] will not hesitate to take action against large suppliers who are misleading customers about prices.”

The supermarkets have denied that they have taken part in price-gouging behaviours.

The ACCC has limited powers to action against price gouging, but the Prime Minister came out in support of the organisation, saying, as per The Guardian, “[If] the ACCC asks for more powers, my government is up for giving it to them.”

One such action could be to enforce the Grocery Code of Conduct, which is currently voluntary.

The supermarkets have the option to reduce their prices before completion of the review.

Lead Image Credit: iStock

This article has been updated since its original publish date.