In brief
- Coles has been found to have misled consumers over the pricing of its "Down Down" products.
- The consumer watchdog accused the supermarket of creating artificial discounts.
Coles has been found to have deliberately misled customers with its "Down Down" in-store promotions in a major legal blow that could have serious financial consequences for the supermarket giant.
Justice Michael O'Bryan delivered the Federal Court judgment on Thursday morning, saying that Coles had made a "misleading representation".
"I have concluded that 13 of the 14 Down Down tickets that were the subject of consideration in the joint liability trial were misleading," the judge said.
"The relevant products were not sold at the 'was' price stated on the ticket for a reasonable period, and, as a consequence, the discount represented on the tickets was not genuine."
"In offering the sample products on those Down Down tickets, Coles engaged in conduct in trade or commerce that was misleading."
The case was brought to the court by the Australian Competition and Consumer Commission (ACCC) and is similar to another case it has brought against Australia's other major supermarket chain, Woolworths.
The supermarket rival has similarly been accused of displaying false or misleadingly described sale prices for products in its store.
Both cases allege that the retailers misled consumers by increasing prices on their products for a short time before lowering them to above their original price and marketing that as a genuine discount.
14 sample items examined
The ACCC alleged that Coles temporarily increased the retail prices of 245 products before placing them on Down Down promotion at prices either higher than or equal to their original.
This was found to have taken place between February of 2022 and May of 2023.
The court examined a sample of 12 so-called "affected products", which are:
- Karicare Follow On formula
- 2 litre Coca-Cola soft drink
- Pedigree adult wet dog food
- Arnott’s Shapes multipack
- Bragg Seasoning nutritional yeast
- Danone Yopro vanilla yoghurt
- Colgate Total Original toothpaste
- Coles Finest quince paste
- Rexona anti persperant
- Lurpak Slightly Salted spreadable butter
- Nature’s Gift wet dog food
- 3 pack Viva paper towel
Two of the products were involved in separate Down Down promotions, giving 14 instances examined in total.
A can of Nature's Gift dog food was on sale for $4 nearly a year before the price was briefly increased to $6. It was then sold under a Down Down ticket for $4.50.
All but the dog food was found to have been misleading in its price-saving claims, O'Bryan found, as that item lacked a "was" price on its advertising.
Fines in the 'hundreds of millions' possible
Former ACCC head Allan Fels has told SBS News that he expects the case will result in "hundreds of millions" of dollars worth of financial penalties for Coles.
"There are 15 million shoppers a week who go into Coles and Woollies all over Australia … and the behaviour by Coles was very sustained and deliberate," he said.
"This decision was made at the highest levels of the business by all the top executives involved, and the board would have known about it."
Internal guidelines at Coles state that a price increase had to stand for 12 weeks before it could be reduced and claimed as a saving to the consumer, something that the company was frequently seen reducing to four or fewer.
"If they go back to a 12 rule, that will clarify things a lot," Fels said.
He added, however, that the damage had been done and consumer confidence will be knocked by this judgment, resulting in a "more cynical and watchful" cohort of Australian shoppers.
"We've been deluged with advertising about prices going down, down, down, but we all know they're going up, up, up," he said.
Angus Kidman, editor-at-large and money expert at the consumer comparison site Finder, told SBS News he is not sure the judgment will prompt major shifts in supermarket behaviour.
"It doesn't seem likely that we're going to see a change in that overall supermarket behaviour of hunting down consumers by offering sales, because it's a proven tactic that works," he said.
"It just seems very entrenched within the supermarket sector generally."
Last year, the ACCC made 20 recommendations to improve competition and pricing transparency following the supermarkets inquiry.
Labor announced in response that it was following through on an election promise to "crack down" on supermarket price gouging — a separate issue to the one discussed in the case.
It said it would provide $29 million over three years to help suppliers "stand up to the big supermarkets" while the rest of the recommendations are still being considered — something Fels said the government should "get on with".
SBS News has contacted the office of the Assistant Minister for Productivity and Competition, Andrew Leigh, for comment.
Further action still to come
In a statement to SBS News, a Coles spokesperson acknowledged the Federal Court decision and said that the company's priority remains on delivering value for its customers.
During separate hearings, lawyers for the supermarkets argued prices increased due to inflationary pressures and the discounts were genuine.
The judge agreed with some of Coles' defence, saying that temporary price increases had been made by the supermarket as a direct result of supplier cost increases and that the company "increased the price in a commercially justifiable manner".
"This case highlights the importance of clarity for both retailers and customers alike," the spokesperson said.
"And the need for clear, practical guidance on minimum price establishment periods to ensure the retail industry can avoid unnecessary litigation in future."
ACCC barrister Garry Rich argued during hearings that Coles was trying to avoid losing customers by disguising price increases as discounts.
"Why on earth are you telling your customers your prices are going down? They're not," he told the court.
But Coles' barrister John Sheahan argued "ordinary, reasonable consumers" knew that prices generally trended upward due to inflation.
The company, which reported a net profit after tax of over $1 billion last year, has said it is reviewing the judgment.
O'Bryan said further case management will take place on 10 June, following consultation with both parties.
— With additional reporting by the Australian Associated Press.
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