Coles engaged in “misleading” marketing through its Down Down campaign, offering discounts that an ordinary consumer would not believe were genuine, a judge has ruled.
Judge Michael O’Bryan found in favour of the Australian Competition and Consumer Commission’s (ACCC) case against the supermarket giant in the Federal Court on Thursday.
The case was centred on price fluctuations for 245 common household products placed on Coles’ Down Down promotions program between February 2022 and May 2023.
A sample of 14 tickets for 12 products were selected as representative for the case, with Justice O’Bryan finding 13 had been deceptively marketed to shoppers in store with Down Down tickets.
During the trial, evidence was shown that Coles briefly spiked the price of these goods for a typical period of four weeks before placing them on the program, using big red tickets to advertise “was” and “now” prices.
Evidence was lead showing both Coles and suppliers accepted lower margins to place items on the Down Down promotion, with the expectation increases to sales volumes would make up the shortfall.
Prior to March 2022, internal Coles rules stated the chain could not place a product onto the Down Down campaign unless the “was” price had been stable for a minimum of 12 weeks.
But due to competition concerns with their major competitor Woolworths, Justice O’Bryan said Coles relaxed these rules.
The judge found Coles’ prices increases were not “artificially high” and reflected genuine supplier cost increases during the high inflation period of 2022 and 2023.
Implicit in the Down Down tickets, Justice O’Bryan said, was a representation to shoppers that the “now” price was a real discount.
He found if Coles had kept the new price on the shelves for a minimum of 12 weeks, as was the company’s previous policy, the promotion would not have been misleading and shoppers would have believed the Down Down ticket prices were a genuine discount.
“This reflects a conclusion that, if an ordinary consumer were told that the product had been ordinarily sold by Coles at the ‘was’ price for a period of twelve weeks immediately prior to the Down Down promotion, the consumer would believe that the Down Down price was a genuine discount,” he said.
“Conversely, if the ordinary consumer were told that the product had been ordinarily sold by Coles at the ‘was’ price for a period that was materially shorter than twelve weeks, the consumer would not believe that the Down Down price was a genuine discount.”
Of the 14 sample tickets, the one Down Down ticket not found to have been misleading was Nature’s Gift dog food because there was no “was” price listed.
ACCC to seek ‘significant’ penalty
Following the decision, ACCC boss Gina Cass-Gottlieb said the consumer watchdog would be making “strong submissions” on the penalty to be imposed against Coles.
Ms Cass-Gottlieb said while the “level of penalty is a matter for the court to determine”, the ACCC would be seeking a “significant deterrent for such conduct”.
“We will certainly make strong submissions on the level of penalty,” she said.
Ms Cass-Gottlieb said the ACCC welcomed the Federal Court’s finding that “Coles broke Australian consumer law”.
“We are happy that the court found that there was misleading conduct in relation to 13 of the 14 sample tickets,” she said.
“These proceedings and these findings have increased transparency.
“The ACCC will continue to take action wherever needed to protect consumers from false or misleading discounts.”
When questioned, Ms Cass-Gottlieb said retailers were “capable” of providing genuine discounts, but failing to do so harmed consumers and law-abiding competitors.
“Firms should continue to give discounts,” she said, but they needed “to very carefully consider what is the understanding of the ordinary consumer”.
In a statement to the ASX, Coles acknowledged the decision and said it was reviewing the judgment.
“The court found that all price increases resulted from supplier cost price increases and were, therefore, commercially justifiable,” Coles said.
“However, the court found that, after a cost price increase, a minimum price establishment period of 12 weeks was required before promoting products on its Down Down program. As a result, the court found the Down Down tickets were misleading.”
Choice director of campaigns Andy Kelly welcomed the ruling as “good news to hold supermarkets accountable for clear transparent pricing” but said reforms were still needed.
“At a time when many households are facing cost-of-living pressures, it’s more important than ever for consumers to be able to trust that promotions reflect genuine discounts,” he said.
“We continue to call on the federal government to implement the ACCC supermarkets inquiry recommendations in full by introducing minimum information requirements for price displays and discount promotions, including the previous price of the product, the date range over which that previous price applied, and the percentage of the discount.”
Mr Kelly warned that because the Nature’s Gift dog food promotion was not found to be misleading, supermarkets could “potentially remove the ‘was’ price and continue to engage in similar conduct”.
During the trial, the ACCC’s barrister Garry Rich SC alleged Coles never intended to charge the full price for these products “beyond the spike” and used the campaign to disguise price rises as discounts.
“All of the evidence Your Honour is going to hear about how there were good reasons for increasing prices begs the question, ‘Why on Earth are you telling your customers that your prices are going down?’” he alleged.
The supermarket chain defended the case, arguing the price increases were genuine and all consumers should have taken from the Down Down campaign, which featured a big red hand, was “an indication Coles is trying to keep prices low”.
Coles now faces further hearings on a penalty for the consumer law breach and a related class action lawsuit brought on behalf of a group of shoppers.
The case will return to court on June 10.
A similar case against Woolworths for its Prices Dropped discounts campaign remains before the court.
