Investing.com-- Australia’s competition watchdog said it had initiated court proceedings against supermarket giants Woolworths Ltd (ASX:WOW) and Coles Group (OTC:CLEGF) Ltd (ASX:COL) over allegedly misleading consumers over price discounts.
The Australian Competition and Consumer Commission alleged that both parties had falsely claimed to be offering discounts on “hundreds” of supermarket products by first hiking their prices and then placing the items in discount categories at rates seen before the hike.
Woolworths practiced this through its “prices dropped” promotion, while Coles did the same through its “down down” promotion.
“...each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory,” ACCC Chair Gina Cass-Gottlieb said in a statement.
The watchdog said it had conducted an investigation into the matter, and found the two violating consumer law over several ordinary items, including chocolates, soft drinks, and other household goods.
It was not immediately clear just how much the ACCC was seeking in fines, although the watchdog said the maximum penalty for each breach of consumer law could be the greater of A$50 million ($34 million).
Coles said the ACCC's allegations were with regards to a period of "significant cost inflation," which saw the firm receive higher prices from its suppliers. Coles plans to defend the proceedings.
Woolworths acknowledged the ACCC's suit, and said it will engage with the regulator over the matter.
Woolworths and Coles have seen their earnings decline steadily in recent years, as Australian consumers scaled back spending amid pressure from high inflation and interest rates. The environment also made Australian shoppers much more budget conscious.