• Last week it was Macquarie, now Australia’s supermarkets are in the news for the wrong reasons
  • Coles and Woolworths are in hot water with the ACCC over alleged misleading pricing 
  • Once again, social media is proven vital for managing company reputations 

 

What a week it’s been for ethical investors, with scandals popping up left and right.

First it was Macquarie Bank (ASX:MQG), which found itself in one last Friday after agreeing to pay nearly US$80 million to the US SEC to settle accusations of inflating the value of thousands of investments. 

Macquarie’s US unit was accused by the SEC of misrepresenting the performance of around 4,900 mortgage-backed securities from 2017 to 2021 by inflating their values without proper justification. 

The company allegedly dumped these securities to some of its US clients, including a mutual fund, leaving those clients to deal with the losses.

More eyebrows were then raised this week after Australia’s competition regulator, the ACCC, announced it was taking legal action against Coles (ASX:COL) and Woolworths (ASX:WOW), accusing them of misleading shoppers with false discount claims.

 

 

The issue was brought to light by consumers who took to social media platforms including X, Reddit, and TikTok to share their experiences, resulting in a wave of complaints about pricing practices that many felt were dishonest. 

For instance, one Reddit user noticed a pattern with Woolworths pricing its Pepsi Max cans. 

They claimed that the cans had been marked up from a promotional price of $24 to $35 for about two weeks, before dropping back to $26. 

This user pointed out that while the supermarket claimed there were significant discounts, the actual price had gone up from the original price:

 

Woolworths raising then lowering prices
byu/SirCorseHock inaustralia

 

Consumers noted other similar issues, like with Sakata Rice Crackers, where prices were allegedly raised before being “discounted” again.

In another instance,  a user on X said consumers were being taken for a ride by Coles:

 

 

 

The ACCC said that as part of the investigation, it tracked these consumer reports and social media discussions for several months.

And after thorough investigation, the ACCC concluded that these pricing tactics were deceptive and that the discounts were essentially nonexistent.

Coles and Woolworths will now be appearing in the Federal Court to answer these allegations, which will involve over 250 products.

The ACCC has applauded the social media sleuths for highlighting the alleged misleading practices.

“We tracked social media and saw on X, Reddit and TikTok that hundreds of consumers were reporting prices that they did not consider were genuine; and we followed that up with our own in-depth investigations powers,” said ACCC chair, Cass-Gottlieb.

 

Social media has changed the ESG game

Reputation has become a crucial aspect of every company, especially in today’s world where social media can rapidly amplify negative news, as well as positive ones.

For ethical investors, social media is indeed a powerful tool for companies to showcase its ESG initiatives.

A recent study conducted by Innovate UK found that social media impacts shareholder reactions to ESG risks.

By analysing 114 million tweets on Twitter (now called X) of companies in the S&P 100 from 2016 to 2022, the study reveals that spikes in negative conversations about ESG issues can lead to significant drops in stock return.

A seperate recent study by a Melbourne-based researcher has also uncovered the significant impact of social media on the share prices of companies listed on the ASX.

Maria Prokofieva, a senior lecturer in accounting and finance at Victoria University, analysed over 3,500 ASX announcements and found that companies engaging effectively on social media tend to see positive effects on their stock prices.

However, Prokofieva also warns that social media can be a double-edged sword. 

Companies that fail to engage on social media risk being overshadowed by critics, potentially leading to declines in their share prices. 

She pointed to cases like David Jones and Whitehaven Coal, which suffered significant drops after facing negative campaigns on social media back in 2012 and 2013.

In response to these challenges, the ASX has now required all listed companies to monitor social media for credible rumours and potential leaks about their businesses.

Prokofieva concludes that maintaining an active social media presence is no longer optional for companies; it’s essential for safeguarding their market position.

The crux of Prokofieva’s findings highlights a key issue: individual investors often lack the time and resources to keep track of every company and its announcements.

So companies that proactively reach out to investors via social media (or even specialised platforms like Stockhead) can attract more attention and boost their market value.

 

ASX’s warning to companies

Meanwhile in July this year, the ASX released guidance for listed mining companies, saying that social media should NOT be used as a platform for disclosing market-sensitive information.

The ASX has made it clear that any such information must first be announced through official market channels.

When posting on social media, the ASX said that mining companies need to ensure they comply with all ASX and JORC Code requirements, just as they would for any public report. 

This means avoiding the sharing of sensitive information, including exploration results or financial data, until it has been properly disclosed through the official market announcements platform.

If a company does need to share information based on visual estimates or observations, it must meet all regulatory requirements and clearly communicate the necessary disclaimers, the ASX said.

This is to ensure that investors aren’t misled by incomplete or unofficial information.

 

 

 

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