Key Takeaways
- The Federal Court ruled that Coles misled shoppers by promoting “Down Down” discounts that were not genuine savings.
- Justice Michael O’Bryan found that Coles used short‑term price spikes as “was” prices to create the illusion of discounts on 13 of 14 examined promotional tickets.
- The court determined that a price must be held at the higher “was” level for a minimum of roughly 12 weeks before it can be lawfully used as a reference for a discount claim.
- The ACCC’s case against Coles (and a parallel case against Woolworths) highlights growing regulatory scrutiny of supermarket pricing tactics during periods of high inflation.
- Coles is expected to face penalties, though the exact fine will be set in later hearings; the judgment may set a precedent for how supermarkets structure comparative pricing in Australia.
Background of the ACCC Lawsuit
The Australian Competition and Consumer Commission (ACCC) launched legal action against Coles and its rival Woolworths, alleging that both chains engaged in deceptive pricing practices between 2021 and 2023. The regulator claimed the supermarkets used promotional programs to conceal actual price increases on hundreds of everyday grocery items, presenting them as discounts under the “Down Down” banner. The ACCC argued that consumers were led to believe they were saving money when, in fact, many items had been sold at lower prices before the advertised “was” price was introduced. The lawsuit sought to establish whether the comparative pricing tactics violated Australian Consumer Law by misleading shoppers about the true value of the discounts.
Coles’ “Down Down” Pricing Strategy
Coles implemented a “was/is” comparative pricing model for its “Down Down” tickets. Under this approach, a product was first sold at its regular price, then the price was raised to a higher “was” level for a brief period—often only a few weeks—before being reduced again to a new “is” price that was equal to or higher than the original price. The promotional ticket displayed the new “is” price alongside the higher “was” price, suggesting a discount. Crucially, Coles did not disclose on the tickets that the elevated “was” price had been in place for only a short time and that the item had previously been sold at a cheaper rate.
Evidence Presented at Trial
During the hearing, the court examined 12 sample products in detail, including Rexona deodorant, Arnott’s Shapes, 2‑litre bottles of Coca‑Cola, and Karicare baby formula, along with 14 specific promotional tickets. Coles admitted that, by the time it raised an item’s price to the “was” level, it had already negotiated and agreed with suppliers on the eventual “Down Down” price. The supermarket’s legal team contended that the promotional prices represented legitimate discounts offered after wholesale cost increases driven by inflation. However, the ACCC presented internal documents showing that the price spikes were pre‑planned and not merely reactive to market conditions.
Justice O’Bryan’s Findings on Misleading Conduct
Justice Michael O’Bryan delivered his judgment on Thursday, concluding that Coles had engaged in misleading conduct in contravention of Australian Consumer Law. He acknowledged that the price increases were carried out in an “ordinary commercial way” and that Coles had responded to supplier requests. Nevertheless, the judge upheld the ACCC’s claim that 13 out of the 14 promotional tickets were misleading because the “was” prices had been maintained for too short a period to constitute a genuine reference price. O’Bryan stated that if the average shopper had known the brief duration of the higher price, they would not have perceived the subsequent “is” price as a real discount.
The 12‑Week Benchmark for Reference Prices
A pivotal aspect of O’Bryan’s ruling was the implicit time threshold he applied to determine whether a “was” price could lawfully support a discount claim. He indicated that the “Down Down” tickets would not have been misleading if the products had been sold at the higher “was” price for a minimum period of roughly 12 weeks. This benchmark is likely to become a reference point for future cases, clarifying how long a price must remain elevated before a retailer can legitimately advertise a reduction from that level. The decision thus provides concrete guidance to the industry on acceptable comparative pricing practices.
Exception: The Nature’s Gift Dog Food Ticket
In the case of the 1.2 kg can of Nature’s Gift dog food—one of the 12 products scrutinised—O’Bryan noted that one of its promotional tickets did not actually display a “was” price at all. Because the ticket lacked the comparative element required for a “was/is” claim, it could not be considered misleading under the same analysis applied to the other tickets. This exception underscores the importance of the presence of a reference price in determining whether a promotional representation is deceptive.
Implications for Coles and the Retail Sector
The ruling delivers a significant reputational and financial blow to Coles, Australia’s second‑largest supermarket chain. While the judge’s decision confirms liability, the exact penalty will be determined in subsequent hearings. The case may prompt Coles to overhaul its promotional ticketing procedures, ensuring that any “was” price used in discount claims is sustained for an adequate duration. More broadly, the judgment signals to Woolworths and other retailers that the ACCC will closely scrutinise “was/is” pricing strategies, especially during inflationary periods when the temptation to mask price hikes as discounts is strong.
Parallel Proceedings Against Woolworths
Justice O’Bryan’s verdict in the Coles case precedes his impending decision in a similar trial against Woolworths, which was heard in Sydney in late April and early May. The Woolworths matter follows the same factual pattern—allegations that the chain used short‑term price spikes to fabricate discounts under its own promotional branding. The outcome of that case will likely echo the reasoning applied to Coles, potentially reinforcing the 12‑week benchmark and establishing a unified standard for comparative pricing across the Australian supermarket sector.
Consumer Impact and Regulatory Outlook
For consumers, the judgment validates concerns that some “Down Down” promotions did not deliver the promised savings during a period of rising living costs. By clarifying the legal requirements for reference prices, the ruling empowers shoppers to assess promotional claims more critically and provides the ACCC with a clearer enforcement tool. Moving forward, regulators are expected to maintain vigilant oversight of supermarket pricing practices, and retailers may need to adopt more transparent pricing disclosures to avoid contravening consumer protection laws. The case underscores the importance of honesty in marketing, especially when economic pressures make genuine value a salient concern for Australian households.