Coles Faces Court Over Claims of Misleading Discount Advertising in Melbourne

Coles is accused of misleading shoppers with its 'Down Down' ads. The ACCC says prices were raised before being advertised as discounted, potentially affecting hundreds of products.
By Newsroom | Business, Law |

Tension is high as Australia's Federal Court begins a significant legal battle where Coles Supermarkets is accused by the Australian Competition and Consumer Commission (ACCC) of deceiving customers. The supermarket giant faces allegations that its well-known "Down Down" campaign, which advertised price reductions, actually misled shoppers for hundreds of products. The outcome of this case could impact consumer trust and lead to substantial fines for Coles, while also setting a precedent for pricing practices across the retail industry, particularly during a period of rising living costs.

The court proceedings, which began in Melbourne, centre on accusations that Coles engaged in "utterly misleading" discount campaigns. The ACCC claims that before advertising price drops, Coles often increased the regular price of products for a period, making the subsequent "discount" appear more significant than it was. This practice, if proven, would mean consumers were not receiving genuine savings and were instead led to believe they were getting a better deal.

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Australia news live: Coles admits in court to strong-arming supplier amid ‘Down Down’ campaign - 1

  • The ACCC alleges this conduct distorted the perception of ordinary consumers regarding grocery prices.

  • Coles denies the discounts were fake, asserting they represented a genuine reduction from a higher, temporarily inflated price.

  • The case is considered a major test of supermarket pricing practices amidst widespread concern over the cost of living in Australia.

The "Down Down" Campaign Under Scrutiny

Coles' "Down Down" advertising strategy, featuring a cartoon hand with a downward pointing finger, has been a prominent feature in its marketing for years. The ACCC's claim is that this campaign, intended to convey lower prices, was in reality used to obscure price increases.

  • The ACCC contends that for many products, including everyday items like toothpaste, soft drinks, and laundry powder, prices were raised before being advertised as discounted.

  • The alleged practice occurred over a period where Coles experienced an "unanticipated" surge in inflation.

  • A former Coles manager, Rebecca Thompson, was questioned in court regarding the pricing of Arnott's Shapes Multipack, with the ACCC claiming shoppers paid the same or more than the usual price, despite discount signage.

Coles' Defence and Supplier Pressure

Coles is defending the allegations, presenting arguments that external factors, specifically pressure from its suppliers, led to price adjustments. The supermarket claims that an unprecedented number of requests from suppliers to increase costs necessitated changes in its own pricing.

Australia news live: Coles admits in court to strong-arming supplier amid ‘Down Down’ campaign - 2

  • Coles barrister, John Sheehan KC, explained that price fluctuations occurred during a period of significant inflation.

  • The company argues that these increases were passed on to customers as a result of supplier demands.

  • However, the ACCC rejects this defence, stating that even if price increases were genuinely needed, it does not justify misleading consumers about discounts.

Key Evidence and ACCC's Position

Evidence presented in court includes internal Coles emails, which reportedly shed light on the company's internal discussions about pricing and competition. The ACCC is using these to build its case that Coles was aware its pricing rules might be hindering its competitiveness.

  • The ACCC's lead barrister, Garry Rich SC, has highlighted specific examples of products where the advertised discounts were allegedly illusory.

  • He described the situation as a "half-truth apt to mislead consumers."

  • The regulator has indicated that Coles' defence regarding inflationary pressures is not a valid justification for misleading advertising.

Potential Ramifications for Coles

Should Coles be found to have engaged in misleading conduct, the consequences could be severe. The company faces the possibility of substantial fines, with some experts suggesting penalties could run into the hundreds of millions of dollars, depending on the scale and duration of the misleading practices. Beyond financial penalties, the reputational damage could be significant, impacting consumer trust and loyalty.

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Australia news live: Coles admits in court to strong-arming supplier amid ‘Down Down’ campaign - 3

  • The case is being watched closely as it could set a benchmark for the retail industry.

  • Woolworths, another major Australian supermarket, is facing similar allegations from the ACCC and is expected to face court later.

  • The legal proceedings coincide with ongoing public concern over Australia's cost of living.

Expert Commentary

Former ACCC chair Allan Fels has commented on the significance of the case, stating that even if price increases were justified by inflation, this does not excuse misleading consumers.

"Quite possibly the price increases were genuinely needed to cover inflation, but that is not a defence to allegations that consumers were misled and deceived." - Allan Fels, former ACCC chair.

This sentiment underscores the ACCC's core argument: the method of advertising discounts is under scrutiny, not necessarily the underlying reasons for price changes themselves.

Conclusion and Next Steps

The Federal Court is expected to hear evidence over several days to determine whether Coles' pricing promotions breached consumer law. The case hinges on whether the advertised discounts provided genuine savings or were designed to create a false impression of value.

  • The court will ultimately decide if Coles misled consumers regarding hundreds of products.

  • The ACCC's broader scrutiny of supermarket pricing practices will be informed by this case.

  • The outcome will have significant implications for Coles, its competitors, and Australian consumers.

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Frequently Asked Questions

Q: Why is Coles Supermarkets in court in Melbourne?
Coles is in court because the Australian Competition and Consumer Commission (ACCC) says the supermarket misled shoppers with its 'Down Down' price cut advertising. The ACCC claims that for many products, prices were increased before being advertised as discounted.
Q: What does the ACCC say Coles did wrong with its 'Down Down' campaign?
The ACCC claims that Coles' 'Down Down' campaign, which showed price reductions, was misleading. They say Coles often raised the normal price of items for a time and then advertised a price drop, making the discount seem bigger than it was.
Q: How could this court case affect Coles and shoppers?
If Coles is found guilty, it could face large fines and damage its reputation. This case is important because it could change how supermarkets advertise prices and affect consumer trust, especially when people are worried about the cost of living.
Q: What is Coles' defence in this court case?
Coles says that price changes happened because suppliers demanded higher costs due to inflation. They argue that these increases were passed on to customers. However, the ACCC says this is not a good enough reason to mislead shoppers about discounts.
Q: What evidence is being used against Coles in court?
The ACCC is using internal Coles emails and specific examples of products, like Arnott's Shapes Multipack, to show that advertised discounts might not have been real savings. The ACCC's barrister called the practice a 'half-truth apt to mislead consumers'.