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Coles misled millions of Australians over the years through its “Down Down” scheme by advertising false discounts to customers, the Federal Court has ruled in a landmark ruling that will expose the retailer to hefty fines.
Federal Court Judge Michael O’Bryan upheld claims from the Australian Competition and Consumer Commission (ACCC) that the Coles discount was simply a discount from inflated prices that were available for too short a time for customers to believe they were real.
Coles’ share price fell slightly an hour after the decision, down more than 2 per cent, as the supermarket considered whether to appeal and the regulator looked at a “significant” penalty.
he said that Coles stole the price on hundreds of items in a short period of time so they can say their new prices were a discount on their previous ones, when in fact the “Down Down” price was higher than just a few weeks ago.
Coles defended the claims, saying their discounts were special to support customers and sales after prices rose due to inflation.
O’Bryan discovered that Coles raised prices because suppliers wanted it to. “Coles raised prices in a commercially acceptable manner,” O’Bryan said in a summary of his decision.
But he said it needed to be sold for 12 weeks at a higher price before customers would consider the discount to be real. Many Coles products were on top prices for just four weeks. As a result, he found Coles had misled customers.
“The products in question were not sold at the price ‘stated’ on the ticket for a reasonable period of time, and, as a result, the discount represented on the ticket was not real,” O’Bryan said.
“In offering a sample of the product on the ‘Down Down’ tickets, Coles engaged in a trade or business that was misleading, contrary to … the Australian Consumer Law, and made a misleading representation as to the price of the sample product.”
O’Bryan’s decision comes ahead of his separate, but very similar, cases against Woolworths and the ACCC, which he is also leading. In that case, the ACCC alleged Woolworths’ “Price Drop” scheme, with discounts reviewed during Sydney court hearings involving products also being sold at higher prices for less than 12 weeks.
At the height of public anger over inflation at the end of 2024, the consumer watchdog lobbed legal bombs at Coles and Woolworths, accusing them of fake discounts on products that were priced the same or higher than before.
Coles said it was reviewing the sentence. “The court found that all price increases were due to supplier price increases and therefore, had commercial justification,” Coles stressed in a statement to the stock exchange.
ACCC chairwoman Gina Cass-Gottlieb said the regulator would be pursuing significant penalties against Coles, which made a profit of $1.1 billion in the last financial year.
“The ACCC will seek a significant penalty, which reflects the importance of correct pricing for consumers and also because it is very important that the penalty is not just dismissed as a cost of doing business, and that it is at a level that is a significant deterrent to such behaviour,” Cass-Gottlieb said.
“The ACCC brought this case in the public interest because we considered that Coles’ pricing practices within its ‘Down Down’ scheme made it difficult for customers to recognize true value for money when purchasing essential household items,” he said.
The consumer watchdog claimed that Coles misled shoppers about “Down Down” prices on 245 products when it filed the original legal action.
But for the two-week session, the parties agreed to focus on a small number of products sold between January 2021 and May 2023, including 2-liter bottles of Coca-Cola, Colgate toothpaste, 900 gram tins of Karicare baby milk, Rexona deodorant, Lurpak butter and Arnott’s Shapes box.
The court heard the example of Nature’s Gift Wet Dog Food, which was sold for $4 between April 18, 2022, and February 7, 2023. It rose to $6 for seven days – its second price – before Coles introduced its third price, $4.50, advertised as a discount from $6.
In another example provided in documents and discussed in court, Shapes biscuits were sold for $5 a pack in 2021, then went up to $6.50 and back to $5.50 with the Coles offer.
Out of 14 product label samples, O’Bryan found 13 consumers were misled. The price of one product, a dog food product, was not considered to have misled consumers because its shelf labels did not include a “was” price compared to a higher price for a period prior to its special.
The court heard evidence that millions of Australians had seen advertisements for the “Down Down” offer, and many had bought the products sold under the offer.
Coles is also facing a class action over misleading advertising, which has yet to be fully heard by the courts. That had been halted when the ACCC case confirmed the reality of Coles’ price-cutting practices, and will now continue.
In contrast to the hearing, when several current and former Coles senior managers were called as witnesses, the federal court on Thursday was without senior representatives from either side.
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is National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect through email address.
