Court rules Coles misled shoppers with its ‘Down Down’ discount campaign
Coles misled Australian shoppers by promoting fake “Down Down” discounts on everyday grocery products, the federal court has ruled in a landmark decision for the supermarket industry,Justice Michael O’Bryan handed down his judgment on Thursday, delivering a significant blow to Australia’s second-largest supermarket chain, which had argued that the discounts represented genuine savings during a period of high inflation,He found the supermarket giant had engaged in misleading conduct, in contravention of the Australian consumer law,The Australian Competition and Consumer Commission sued Coles and its rival Woolworths, accusing the supermarket giants of duping shoppers between 2021 and 2023 by using promotional programs to disguise price increases on hundreds of products,O’Bryan’s verdict in the Coles case – which was heard in February – comes before his decision in a similar trial against Woolworths, which was heard in Sydney in late April and early May and which the judge will rule on later this year.
In the Coles case, the supermarket sold 245 products at one price for a median period of a year, then increased their price for a median of just 28 days, before reducing this to a third price which was more expensive or equal to the first price.The strategy is known as “was/is” comparative pricing: Coles advertised products to shoppers with “Down Down” promotional tickets that displayed their new, supposedly discounted “is” price next to a higher “was” price.But the supermarket did not disclose on the tickets that the “was” prices had been in place for only a short period and that the items had been sold at a cheaper price before that.During the trial, Coles conceded that by the time it raised the price of an item from the original to the “was” price, the supermarket had already planned and agreed with the supplier on what the new “Down Down” price would be.Legal counsel for the supermarket argued that the promotional prices were genuine discounts offered to shoppers after an increase in wholesale costs charged by suppliers during a period of rising inflation.
The trial examined 12 sample products in detail, including Rexona deodorant, Arnott’s Shapes, two-litre bottles of Coca-Cola and Karicare baby formula, and 14 pricing tickets,Reading a summary of his judgment in a Melbourne courtroom on Thursday, O’Bryan agreed the price increases were done in “ordinary commercial way” and Coles had been meeting requests from suppliers,But the judge upheld the ACCC’s allegation that Coles falsely promoted “discounts” on 13 out of 14 promotional tickets based on increased prices that had been available for too short a period,O’Bryan said if the average shopper had known the “was” prices on the tickets had been in place for such a short amount of time, they would not have thought the discounts were genuine,He said the “Down Down” tickets for the sample products would not have been misleading if the products had been sold at the “was” price for a minimum period of 12 weeks.
This aspect of his judgment is likely to set a precedent for the supermarket industry – how long a price rise must apply before a discount can be promoted without legal consequence,During the trial, Coles executives were cross-examined about why the supermarket relaxed its own rules – known as guardrails – designed to prevent manipulation of the “Down Down” promotional program,Under Coles’ older guardrails, introduced in 2019, if a product was taken off “Down Down” by reason of a cost price increase, it could not be returned to the “Down Down” program for nine months,In his judgment, O’Bryan said Coles updated the guardrails in January 2022, effectively imposing a “price establishment period” of 12 weeks,This meant Coles was meant to sell products at one regular price for 12 weeks, before they could go on to “Down Down”, to stop the promotional program from being deceptive.
However, as O’Bryan noted in his judgment, the guardrails were wound back in March 2022, meaning Coles effectively reduced the “price establishment period” to four weeks.O’Bryan said Coles relaxed the guardrails in response to competitive pressure from Woolworth that likely brought about a “race to the bottom” in terms of compliance with the Australian consumer law.The judge’s decision means Coles is expected to face penalties but the size of the fine won’t be determined until later court hearings.The ACCC chair, Gina Cass-Gottlieb, said the regulator would seek a “substantial” penalty “reflecting the importance of accurate pricing for consumers”.“It is very important that a penalty is not just able to be dismissed as a cost of doing business, and that it becomes at a level that is a significant deterrent for such conduct,” she told reporters in Sydney following the court judgment.
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