Source : Perth Now news
A supermarket accused of misleading customers with promotions that didn’t deliver value has maintained their consumers were not duped.
Australia’s biggest supermarket chain Woolworths is battling claims they breached Australian Consumer Law by misleading consumers with fake discounts in a Federal Court hearing this week.
The ACCC claims Woolworths falsely or deceptively represented prices of 266 products, including X, Y and Z, between September 2021 and May 2023.
Woolworths is accused of implementing short-term price rises of at least 15 per cent on products that had been on shelves at stable prices for at least six months.
The supermarket is then accused of placing the products on a Prices Dropped promotion at a long-term lower price; however, the lowered prices remained higher than, or the same as, the original stable price.
The hearing, which commenced on Tuesday, examined testimony from Woolworths chief commercial officer Paul Harker on Wednesday.
Mr Harker said, at any given time, roughly 2000 products of the around 28,000 products in store would be included on the Prices Dropped promotion.
He said the Woolworths team would almost always negotiate a supplier’s involvement in the promotion at the same time as prices were being negotiated.
Mr Harker advised the court a price establishment period – the time at which a product must remain at its higher price – and a resting period – how long before a supplier’s product could return to the Prices Dropped promotion after increasing its price – were established by Woolworths leadership.
In guidelines set at March 2020, the price establishment period was set at eight to 12 weeks, with suppliers barred from returning to the promotional program for six months after negotiating a price increase.
He claimed the time periods were put in place to “decentivise” suppliers or team members “gaming” the system; adding there were natural negative consequences for both suppliers and team members who chose to remove a product from the promotion.
“They were actually designed to have the team and the supplier work very hard to ensure they weren’t coming off the program,” Mr Harker said.
“To keep that (price) promise in place for as long as considerably practical.”
He said, during this version of the policy, the Australian economy was experiencing uncharacteristically low inflation.
“There weren’t significant cost pressures (for suppliers) and therefore there was no justification to be changing the prices,” he told the court.
“There would have to be strong commercial justification to remove something from the program.
“There is a tremendous downside in taking it off and it’s very hard to get it back on again.”
Mr Harker conceded the price establishment period was also required to ensure there was a marked drop in price for when the Prices Dropped promotion came into effect.
He said the policy changed when inflation hiked post-Covid.
“The law requires we don’t mislead consumers,” he said.
“The advice we have is not very particular, other than saying you need to have held a price for a reasonable period of time and sell reasonable quantities.
“As inflation continued to grow and grow and grow, we revised these policies; we moved away from a set of policies that are about managing team and supply dynamics to what does it actually mean (for customers).
“That’s how we arrived at our final price trust policy of three to six weeks.”
ACCC barrister Michael Hodges KC queried why Mr Harker neglected to mention in his affidavit that he came to understand the policy procedures through discussions with the commercial leadership team.
“I didn’t put it in there at the time because I was dealing with the policy that was in place when I had sole responsibility for the team … maybe I should have done that, but I’m doing it now,” Mr Harker replied.
The chief officer said Woolworths followed similar competitor programs, like Coles’ Down, Down policy, in bringing their Prices Dropped program to market around 2015.
The Down Down pricing program was the subject of a very similar Federal Court matter earlier this year whereby the ACCC accused Coles of misleading consumers.
The matter is yet to be decided.
Mr Harker started with Woolworths Group in 1993, working his way up to head office and landing in his current role in July, 2020.
He previously held other senior roles including overseeing replenishment, perishable and fresh food.
The Federal Court case for Woolworths will run for two weeks.
More to come
