Claims that Coles misled shoppers with “illusory” discounts on a range of household goods will be tested in the Federal Court this week as the competition watchdog and the supermarket giant square off in a blockbuster case over pricing promotions.
The high-profile case, which will serve as a key test on practices across the industry, will put the microscope on whether promotions on hundreds of products were genuine or misleading, and could leave the supermarket facing hefty fines.
The Australian Competition and Consumer Commission (ACCC) lobbed the bombshell allegations against Coles and rival Woolworths in late 2024, alleging the two retailers misled consumers through pricing promotions that were actually higher, or the same as, the previous regular price.
Coles is defending the case, and has said many of its suppliers who were facing cost pressures asked it to push up prices during the period in question. Woolworths, which is facing similar allegations from the ACCC, is expected to face court in the coming months.
Coles will argue that the ACCC’s case relates to a period when the supermarket and its suppliers were experiencing “significant cost increases including, but not limited to, a surge in global commodity prices, and in the cost of packaging, freight, utilities and international shipping”.
Coles and its suppliers therefore reassessed the pricing of products, according to the firm’s concise response statement, with some products taken off its “Down Down” program and sold at non-promotional price “in substantial volumes” and for up to six weeks before later being returned to the discounted program.
“The non-promotional price was a genuine, undiscounted shelf price,” Coles has told the court. “The subsequent ‘down down’ program price was therefore a genuine discount from that shelf price. The discount was not illusory.”
The 10-day hearing, which will be streamed on the Federal Court’s YouTube channel from Monday morning, will be conducted by Justice Michael O’Bryan, who helped carry out a review of Australia’s competition laws a decade ago.
In the ACCC’s concise statement, it said Coles’ “Down, Down” program was marketed as a campaign designed to reduce the regular shelf price of commonly purchased products, “thereby offering customers predictable and reliable value” and reducing the cost of their shopping basket.
The ACCC alleges Coles increased the price of hundreds of products “for only a relatively short period of time” of up to 45 days, before placing them on the “Down Down” promotion, in most cases advertising that briefly higher price as the relevant comparison price.
“The false or misleading representations concerned the price of household staples at a time of increasing cost of living pressures, and were made in the context of a program which Coles specifically promoted as being designed to help consumers make long-term savings on the cost of their groceries,” the watchdog said. “By its conduct, Coles diminished the ability of consumers to make informed choices about their essential purchases.”
Fines can reach $50 million for each breach, as well as a donation of grocery products to various charities. The ACCC will argue Coles made 255 breaches including some products which were placed on the “Down Down” promotion more than once during the period in question.
For the sake of efficiency, the court hearings are likely to focus on 12 items in particular, including Karicare formula, packets of Arnott’s Shapes and a tub of Danone yoghurt.
Coles’ lead barrister for the case is John Sheahan KC, who has represented a range of large firms including ANZ when the Australian Securities and Investments Commission alleged the bank breached its continuous disclosure obligations during a $2.4 billion capital raising, as well as this masthead’s owner Nine, and journalists Nick McKenzie, Chris Masters, and David Wroe in their defence against defamation claims brought by former soldier Ben Roberts-Smith.
The ACCC’s barristers will be led by Garry Rich SC, who represented the ACCC in proceedings against Meta when the competition watchdog alleged the tech giant had contravened the Australian Consumer Law, as well in proceedings about ANZ’s acquisition of Suncorp bank in 2023.
The case comes as the government faces renewed pressure on the cost of living after inflation rose 3.8 per cent in the 12 months to December and the Reserve Bank lifted interest rates this month.
When the ACCC’s case was launched in September 2024, Prime Minister Anthony Albanese accused Coles and Woolworths of adding to inflation and higher interest rates while ACCC chair Gina Cass-Gottlieb said the companies had used their long-term promotions to convince shoppers that prices were being held steady when in reality they had pushed them up, alleging the discounts were “illusory”.
Coles chief executive Leah Weckert said in October that year that the supermarket chain took the matter very seriously. “All of our specials, discounts and programs like ‘Down Down’, we aim to genuinely provide genuine savings for our customers, and that goes to the heart of customer trust,” she said.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.