‘Absolute tsunami’ of price rise requests led Woolworths to change internal rules

Woolworths changed its internal guidelines that were designed to prevent suppliers from “gaming” promotions in response to an “absolute tsunami” of supplier requests to lift shelf prices amid rising inflation, a former senior executive has told the Federal Court

Woolworths’ former chief commercial officer Paul Harker on Wednesday faced questioning in the Australian Competition and Consumer Commission’s (ACCC) landmark case against the supermarket giant, in which Woolworths is accused of offering “illusory discounts.”

Harker said Woolworths’ “Prices Dropped” program was designed to give shoppers longer-term price certainty and discourage suppliers from arbitrarily lifting prices while the markdowns were running.

“The rules operated as a disincentive for people to try and move things on and off the program without a legitimate commercial justification. If you were, you couldn’t game the system,” Harker told the court.

“You need to have a really good reason to want to take [a product] off because there is tremendous downside in taking it off [the Prices Dropped program]. It’s very hard to get it back on again.”

Harker is the first witness to be called to the stand in the fortnight-long case playing out in Sydney’s Federal Court that examines the price movements of a basket of 12 pantry staples like Tim Tams, Oreos, Kleenex tissues, and home brand penne pasta.

The ACCC has accused the supermarket of making “false or misleading representations” by promoting the discounts as helping shoppers make long-term savings on groceries at a time of rapidly climbing cost-of-living pressures.

When questioned by ACCC lead barrister Michael Hodge, KC about which specific guidelines were designed to prevent “gaming the system”, Harker also pointed to the price establishment window preceding a discounted price, which was initially set at 8 to 12 weeks, but was later reduced.

“You understand that the principal reason for a price establishment is so that the drop that is being promoted is a legitimate drop,” Hodge, KC put to Harker.

Harker responded: “The law requires we don’t mislead consumers. The guidance that we have, which is not very particular, other than saying you needed to hold a price for a reasonable period of time and sell reasonable quantities.”

However, as inflation continued to move through the Australian economy, Woolworths’ internal “price trust policy” was tightened from 8 to 12 weeks to about half that length. This was not set out in a document, but had been decided through active conversations with the commercial leadership team, the court heard.

“We moved away from a set of policies that are about managing team and supply dynamics to ‘what does it actually mean at the shelf for a customer’, and that’s how we arrived at our final price trust policy of three to six weeks,” said Harker.

Harker spent more than three decades at Woolworths and was most recently chief commercial officer in charge of the buying and merchandising teams for five years before stepping down last year.

In Tuesday’s opening remarks, Hodge told the court that there was a “subtle magic” in the red-and-white tickets of the Prices Dropped program.

After the consumer watchdog launched the lawsuit against Coles and Woolworths in September 2024, Woolworths quietly discontinued the “Prices Dropped” program in December 2024 and has focused instead on its “Lower Shelf Price” commitment that promises lower prices for at least 12 weeks. Coles’ “Down Down” program still exists.

Justice Michael O’Bryan is overseeing both cases against Woolworths and Coles, the judgment for which is reserved.

During the Coles proceeding in February, internal emails read out to the court revealed how Coles shortened its own price establishment window of 12 weeks to match Woolworths’.