Discount class action fresh headache for grocery giants

Woolworths and Coles will fight class action lawsuits brought over claims they deceived customers through misleading promotions on everyday products.

Law firm Gerard Malouf and Partners has lodged two class action suits against the supermarket giants in the Federal Court, alleging they breached Australian consumer law through misleading promotional discounts on hundreds of items.

Both Coles and Woolworths on Friday told shareholders they would defend themselves against the class actions.

"Woolworths Group intends to defend the class action proceedings," the supermarket said on the ASX.

The fresh lawsuits follow legal action by the Australian Competition and Consumer Commission's (ACCC) against the two supermarket giants.

"Coles announced on 23 September 2024 that it is defending the ACCC proceedings, and also intends to defend the proceedings commenced by Gerard Malouf & Partners," Coles said in its announcement.

The commission claims the retailers bumped up the price of products by 15 per cent for brief periods, placing them in Woolworths' "Prices Dropped" promotion and Coles' "Down Down" promotion.

Their prices were lower than during the price bump, but higher or the same as the regular price, the commission says.

While the consumer watchdog's proceedings will focus on regulatory penalties, the class action seeks compensation including the difference between the advertised discount prices and the actual prices charged, for impacted customers

"We estimate that the average Australian consumer could be eligible for a refund ranging between $200 and $1,300+, depending on their shopping habits and purchases at these retailers," the law firm's chairman Gerard Malouf said.

"We believe this class action is an essential move toward safeguarding consumer rights and demanding transparency in retail practices Australia-wide."

The legal challenges come as an ACCC inquiry into supermarkets on Friday heard the major supermarkets dictate supplier price rises, leaving Metcash - which licenses independent grocery chain IGA - at the whim of those increases.

Metcash-supplied retailers account for about seven per cent of supermarket sales, compared to Coles and Woolworths' combined two-thirds market share.

"We are not the price-setter in the market and so ultimately, the key measure of whether a price change sticks and is applied across the market, is whether Coles and Woolworths accept it," Metcash food division chief Grant Ramage told the inquiry.

The consumer watchdog's interim report found sales have been shrinking at Metcash-supplied independent grocers, while Aldi, Coles and Woolworths increased their footprints.

Aldi representatives faced public hearings earlier in the week, while those from Woolworths and Coles will appear from Monday.

The ACCC's final report is due in February.