A landmark ruling that Coles misled shoppers through illusory discounts sends a clear message about the need to place shoppers’ understanding above competition tactics, the consumer watchdog says.
Coles deliberately disguised price hikes as discounts under its “Down Down” price campaign, Federal Court judge Michael O’Bryan found on Thursday.
“Thirteen of 14 ‘Down Down’ tickets that were the subject of consideration in the joint liability trial were misleading because the relevant products were not sold at the ‘was’ price stated on the ticket for a reasonable period,” Justice O’Bryan said.
“As a consequence, the discount represented on the tickets was not genuine.”
The Australian Competition and Consumer Commission brought separate but similar cases against the country’s two dominant supermarket chains with a Woolworths suit awaiting judgment at a later date.
Both cases alleged the supermarkets misled consumers by increasing prices for a short time before lowering them to above the original price and marketing it as a discount.
ACCC chair Gina Cass-Gottlieb said the ruling sent a message to all retailers to carefully consider the understanding of the ordinary customer in devising promotions.
“Firms should continue to give discounts … but it has to be accurate and well understood by consumers,” she said.
The decision could mean the $28 billion company is hit with significant penalties, which will be the subject of discussion by the parties.
It was important any penalty could not simply be written off as the cost of doing business and was at a level that meant it acted as a significant deterrent, Ms Cass-Gottlieb said.
“The ACCC will seek a substantial penalty, reflecting the importance of accurate pricing for consumers,” she said.
Coles said in a statement it acknowledged and was reviewing the judgment.
Justice O’Bryan noted that until March 2022, Coles’ own internal policies stipulated a product could not be sold under the “Down Down” promotion unless it had been sold at the previous price for a minimum period of 12 weeks.
But the company relaxed its policy under perceived pressure from its chief competitor, Woolworths.
Justice O’Bryan found the pricing would not have been misleading if the products were sold at a higher cost for 12 weeks before being marketed as a discount.
“The vast majority of ordinary consumers, when shopping would not have formed any conscious belief about the period for which the product had been offered for sale by Coles … beyond an intuitive sense the discount being promoted was genuine and not artificial,” he said.
Justice O’Bryan also ruled one of the products sold under the “Down Down” campaign, a can of Nature’s Gift dog food, was not misleading because it did not include a “was” price on the ticket.
The watchdog identified hundreds of products on the Coles campaign and a similar “Prices Dropped” push from Woolworths that followed a similar formula.
During separate hearings, lawyers for both supermarket giants argued prices increased due to inflationary pressures and the discounts were genuine.
Coles’ barrister John Sheahan said “ordinary, reasonable consumers” knew that prices generally trended upward due to inflation.
By early afternoon, Coles’ share price was down about 2.5 per cent, while Woolworths had a smaller dip of about 1.9 per cent.
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