Next indignity for Coles, Woolies

A prominent class action lawyer says allegations of misleading sales levelled against Woolworths and Coles “support a very good class action claim”.

The consumer watchdog this week announced it was separately suing Coles and Woolworths for allegedly deceiving customers with hundreds of “sale” prices for more than a year up to May 2023.

Coles says it will defend the case, Woolworths says it will “carefully review the claims”.

Changes to the Australian Consumer Law now legislate maximum penalties of $50m, or three times the value of the “reasonably attributable” benefit obtained, for each time a customer was deceived.

A government source has cautioned against even multiplying the 266 Woolworths products in question – or Coles’ 245 products – by $50m to speculate on what damages figure the Australian Competition and Consumer Commission could pursue should the Federal Court rule in its favour.

On Monday, ACCC chair Gina Cass-Gottlieb said the penalties her commission would pursue had to be enough to deter other corporations and “not a cost of doing business for such major companies”.

Ms Cass-Gottlieb played a very straight bat when asked about the potential for a civil class action being launched by customers, saying that was not the commission’s role.

“We are seeking redress in the case through a community service order (for Woolworths and Coles) to give to the most needy members of our community,” she said.

“There is always a potential of class actions in relation to consumers who’ve been harmed.”

Carter Capner Law director Peter Carter reckons customers should entertain a class action.

“The alleged facts support a very good class action claim on behalf of consumers Australia-wide who regularly shopped at those markets during the relevant period,” he told NewsWire.

Doing some quick numbers, Mr Carter said if he were leading a class action based on these allegations, compensation for claimants would vary on household size.

A house that spent $500 a week on food, given the supermarkets allegedly charged roughly 10 per cent more than the original price when various items went on sale, a large house could ask for $4000-$5000 compensation.

“On a uniform loss per household or single consumer, a claim upwards of $2000 each might be reasonable,” Mr Carter said.

“These are back-of-the envelope figures. The numbers have to be crunched by the data scientists we work with to formulate the right approach.”

A potential class action would not hinge on the ACCC’s case in the Federal Court.

“But the evidence the ACCC has collected would be useful. That said, collecting evidence is something a class action lawyer is well capable of doing themselves,” Mr Carter said.

The Brisbane-based lawyer has a penchant for airline passenger class actions. One of his cases is representing clients on-board a London to Sydney flight that hit injury-causing turbulence in May.

It is still early days in the ACCC Federal Court case; Coles and Woolworths were served papers on Monday. But both share prices took a dip in the ensuing days.

The reputational harm from being sued would add to negative sentiment against the supermarkets, Mr Carter said.

“Consumers should express their outrage. They should keep top of mind that this was (allegedly) extremely offensive conduct designed to deceive them.

“The supermarkets’ conduct shouldn’t be allowed to be swept under the carpet.”

On news of the case being filed in the Federal Court on Monday, Coles’ share price dropped 4.8 per cent by Wednesday, and Woolworths lost 3 per cent.

Late on Thursday, the ACCC came at the supermarket giants on a different front, releasing an interim report from a separate general inquiry it is conducting into the supermarkets.

The ACCC says “oligopolistic market structures can limit incentives to compete vigorously on price”.

“We see Woolworths and Coles providing a broadly similar experience to customers through largely undifferentiated product ranges, pricing at similar levels and similar non-price offerings including loyalty programs,” the ACCC report reads.

After that interim report came out, Coles’ share price lost another 1.2 per cent by early afternoon on Friday. Woolworths’ price was down 0.7 per cent too.

“Throughout the year, Woolworths Group has engaged in a number of inquiries and reviews in good faith and will continue this approach including appearing at public hearings and providing any further information as required by the ACCC.” Woolworths told the ASX on Friday.

Both supermarkets cited the pending Federal Court matter as reason not to comment to NewsWire for this story. Both were asked what they were doing to prepare for the Federal Court case, if their supermarket had increased charitable donations since the case was filed, if they were concerned about a potential class action, and the implications of large penalties should they lose in court.