The nation’s second-largest supermarket has been found to have misled customers by offering fake discounts at a time when rising living costs are putting Australians under immense financial hardship, making it impossible for many to make ends meet.
In a landmark case, Federal Court Justice Michael O’Bryan upheld allegations from the Australian Competition and Consumer Commission (ACCC) that Coles’ discounts through its “Down Down” program were only a reduction from increased prices that were available for too short a period for customers to believe they were genuine.
The consumer watchdog alleged that Coles misled consumers about the prices of 245 products between February 2022 and May 2023. Of 14 sample “Down Down” product labels, O’Bryan found 13 were misleading because the discounts were compared to elevated prices that had existed for four weeks or fewer. Before that month-long period, the products had been available for even cheaper prices than the claimed discount. The “Down Down” tickets, O’Bryan said, “were misleading because 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”.
Supermarkets have come in for heavy criticism recently for alleged price gouging after building up goodwill and brand loyalty during the pandemic. Equally, there have been calls for an urgent review of the behaviour of key regulators, such as the ACCC and the Australian Securities and Investments Commission, with claims aggressive corporate regulators were hurting the economy with their “gotcha” approach against businesses, while administrative red tape was stifling investment.
But Thursday’s Federal Court decision surely validates the decision by ACCC chair Gina Cass-Gottlieb to take on the supermarket giant. “The ACCC brought this case in the public interest because we considered that Coles’ pricing practices within its ‘Down Down’ program made it harder for customers to identify genuine value for money while shopping for household essentials,” Cass-Gottlieb said.
The ACCC will now attempt to get Coles to agree to orders as a result of the legal breaches, which are likely to include significant financial penalties. Coles also faces a class action over the misleading promotions, which is yet to be fully heard by the court.
O’Bryan’s Coles judgment came ahead of his ruling in separate, but very similar proceedings against Woolworths by the ACCC, which he is also overseeing. In that case, the ACCC took aim at Woolworths’ “Prices Dropped” program, which also involved discounts based on elevated prices that were in place for less than the 12 weeks the judge said was acceptable in the Coles case.
The two big chains pocket $2 out of every $3 Australians spend at supermarkets.
Coles maintained it did not mislead customers and argued that the discounts represented genuine savings during a period of high inflation. But for a company that depends on reputation, transparency of price and the affordability of their goods, this is a significant blow for the nation’s second-largest supermarket chain, with more than 840 stores.
Coles’ main seller used to be trust. It’s no longer in stock.
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