Coles Accused of Tricking Shoppers with Fake Sales

A court case has started in Australia. Coles is accused of making its sales look better than they were. The ACCC says this tricked shoppers. The case looks at many everyday items.
By Newsroom | Business, Australia |

A major court case has begun in Australia, with consumer watchdog the ACCC accusing supermarket giant Coles of deliberately misleading customers with its "Down Down" pricing promotions. The Australian Competition and Consumer Commission (ACCC) alleges that Coles increased the prices of some products shortly before advertising them as being on special, creating the illusion of savings. This legal challenge, focusing on a range of common household items, could have significant implications for how supermarkets advertise sales and for consumer trust in the Australian grocery market.

Coles concedes mistake in ‘discounting’ item to make it more expensive after a week - 1

The Australian Competition and Consumer Commission (ACCC) has launched a legal case against Coles, one of Australia's largest supermarket chains, in the Federal Court. The core of the ACCC's argument is that Coles' advertised "Down Down" prices, intended to signify significant price reductions, were in fact not genuine savings for consumers.

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Coles concedes mistake in ‘discounting’ item to make it more expensive after a week - 2

  • The Allegation: The ACCC contends that Coles would raise the regular price of certain products for a short period, often for fewer than 12 weeks, before marking them down. This practice, the watchdog claims, made the subsequent "discounted" price appear lower than it truly was, relative to the actual cost customers would have paid without the promotion.

  • Scope of the Case: The court is examining a selection of approximately 245 products. These items span a broad spectrum of everyday goods, including dog food (specifically, Nature's Gift wet dog food), deodorant (Rexona), biscuits (Arnott's Shapes), soft drinks (Coca-Cola), toothpaste, shampoo, band-aids, and laundry powder.

  • ACCC's Goal: The ACCC is seeking substantial penalties against Coles, along with community service orders, should the supermarket be found to have engaged in misleading conduct.

  • Market Context: Coles, alongside Woolworths, holds a commanding position in the Australian grocery market, controlling about two-thirds of the industry's share. This case unfolds during a period of renewed inflation, where grocery costs are a significant concern for households.

Evidence and Arguments Presented

The court proceedings have begun with the ACCC outlining its case, supported by internal documents and specific pricing examples. Coles, in turn, has begun to present its defence, highlighting perceived weaknesses in the ACCC's claims.

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Coles concedes mistake in ‘discounting’ item to make it more expensive after a week - 3

  • ACCC's Opening Statement: Barrister Garry Rich SC, representing the ACCC, presented examples such as the pricing of 1.2kg cans of Nature's Gift wet dog food. He argued that the advertised prices were often the same as, or even higher than, the product's previous regular price. The ACCC's core assertion is that Coles' actions created "illusory" discounts, thereby distorting the consumer's perception of genuine savings and boosting sales.

  • Internal Communications: The ACCC has pointed to internal Coles documents, which allegedly show changes to the supermarket's pricing policies and guardrails concerning the discount program before the period of alleged misleading conduct. This is presented as evidence of a deliberate strategy.

  • Coles' Defence: Coles' lead barrister, John Sheahan KC, has begun outlining the supermarket's defence. He has indicated that for most of the 245 products under scrutiny, Coles did not significantly increase prices for a very short duration. Coles also argues that adding extensive price history information to product labels would make them too difficult for customers to understand. The company has also suggested that external pressures from suppliers, who requested cost increases, led to the price changes being examined.

Internal Warnings and Corporate Policy

Evidence has emerged suggesting that internal discussions within Coles acknowledged potential issues with the pricing strategy, even as the "Down Down" campaign continued.

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Coles concedes mistake in ‘discounting’ item to make it more expensive after a week - 4

  • A Manager's Query: An internal note from Chris Reid, then head of pricing and value at Coles, has been brought to light. He reportedly questioned the relevance of an initial price when calculating a discount if the product's fundamental cost had changed. This query arose as staff considered a shorter lead-up time of just four weeks before a price change, deviating from a prior practice of holding higher prices for at least 12 weeks before discounting.

  • Coles' Stance: Coles has maintained that its pricing strategies, including the "Down Down" promotion, reflect genuine discounts and that it is committed to helping Australians manage their grocery costs and lower the cost of living.

Broader Market and Consumer Impact

The case is being viewed as significant due to the market dominance of the two major supermarket chains and the widespread consumer concern over rising grocery prices.

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  • Brand and Trust: Beyond financial penalties, the case is seen as a critical test of Coles' brand reputation and the trust consumers place in its pricing. The ACCC's argument is that Coles' actions distorted the perception of the ordinary consumer.

  • Influence of Social Media: The litigation has also been influenced by public scrutiny, with social media, particularly Reddit, playing a role in highlighting alleged misleading pricing practices on a variety of everyday products, leading to a surge of customer complaints.

Expert Analysis

Legal and consumer experts have commented on the significance and potential outcomes of the case.

"The ACCC's claim Coles said prices were going down when they were going up had distorted the perspective of the ordinary consumer." - ACCC Barrister Garry Rich SC (as reported in multiple sources)

"Coles began hitting back and pointing out what it saw as serious flaws in the consumer watchdog's case." - Reported observation of Coles' defence

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Professor Fels, a former ACCC chairman, has indicated that the duration for which Coles increased prices before offering a discount will be a crucial factor in the court's decision.

Conclusion and Next Steps

The Federal Court is hearing allegations that Coles engaged in "utterly misleading" pricing tactics as part of its "Down Down" promotion. The ACCC aims to demonstrate that the supermarket manipulated prices to create a false impression of savings, impacting consumer trust and potentially leading to substantial fines for Coles. Coles, conversely, argues that its promotions offer genuine discounts and that external supplier cost increases contributed to the pricing changes.

  • Key Legal Battlegrounds: The court will likely focus on the duration of price increases before discounts, the interpretation of "regular price," and whether Coles' actions constituted misleading conduct under consumer law.

  • Future Implications: The outcome of this case could set precedents for how supermarkets advertise discounts and promotions, potentially leading to stricter regulations or increased transparency requirements across the industry.

  • Ongoing Proceedings: The Federal Court hearing is scheduled to continue, with further evidence and arguments expected from both the ACCC and Coles.

Sources Used:

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Frequently Asked Questions

Q: What is Coles accused of?
Coles is accused of making its "Down Down" sales look like bigger savings than they really were. They may have raised prices before putting them on sale.
Q: Who is taking Coles to court?
The ACCC, which is the Australian Competition and Consumer Commission, is taking Coles to court.
Q: What kind of products are involved?
The case looks at many common items like dog food, drinks, toothpaste, and laundry powder.
Q: Why is this case important?
It is important because it could change how supermarkets advertise sales and affect shoppers' trust.