Melbourne, Australia – Supermarket giant Coles is facing accusations of deliberately misleading customers with “illusory” discounts, as a landmark Federal Court case commenced this week. The Australian Competition and Consumer Commission (ACCC) alleges that Coles engaged in a “planned” campaign to inflate prices temporarily before offering products under its long-running “Down Down” promotional banner.
The ACCC’s case centers on the pricing of 245 everyday household items between February 2022 and May 2023. The consumer watchdog contends that Coles raised prices for a short period, then reduced them to levels that were often higher than the regular price before the promotional period began, creating a false impression of genuine savings.
Coles, however, is defending its pricing practices, arguing that the “Down Down” promotion is widely understood by consumers as a legitimate, long-term discount. Representing Coles, barrister John Sheahan KC told the court on Tuesday that shoppers would perceive the promotion as a “fair dinkum” – genuinely honest – reduction in price. “So long as the was price is a genuine price, not contrived or ephemeral, then the consumer’s interest is appropriately satisfied,” Sheahan stated.
Sheahan further argued that the promotional prices were genuine discounts offered after increases in wholesale costs from suppliers, driven by inflationary pressures. “To say prices are going down plainly means the price is lower than it would have been but for this promotion,” he said.
The ACCC alleges that Coles deliberately manipulated prices to maximize revenue during promotional periods. According to ACCC head counsel Garry Rich SC, the “Down Down” sale generated substantially more revenue for Coles than sales at regular prices. Rich presented evidence to the court, including an example of Nature’s Gift Wet Dog food, which was sold at A$4 for almost 300 days before being briefly increased to A$6 and then reduced to A$4 under the “Down Down” promotion.
Rich described the discounts as “utterly misleading,” asserting that Coles repeatedly deceived its customers. “Why on earth are you telling your customers the price is going down? They’re not,” he said. The ACCC claims that internal Coles documents reveal changes to policy guardrails surrounding the discount program prior to the alleged misleading conduct, suggesting a deliberate strategy.
The case has significant implications for the Australian grocery market, where Coles and Woolworths control approximately two-thirds of the market share. The ACCC is also pursuing a similar case against Woolworths, alleging misleading discounts under its “Prices Dropped” campaign. A hearing in that case is scheduled for a later date.
The ACCC is seeking substantial penalties and community service orders against Coles if it loses the case. The hearing, expected to last ten days, continues in Melbourne.
