A Federal Court judge has found that supermarket giant Coles misled shoppers with its prominent "Down, Down" discount campaign. The ruling could lead to penalties in the "hundreds of millions of dollars," according to multiple reports, a significant financial blow for Australia's second-largest grocery chain.
Justice Michael O’Bryan determined that Coles engaged in misleading conduct under Australian consumer law by marketing products as discounted when, in many instances, the prices had been artificially inflated shortly beforehand. This practice led consumers to believe they were getting a better deal than they actually were.
The court specifically examined Coles' practice of raising prices on products for a median period of just 28 days before advertising them at a reduced rate, a tactic found to be deceptive. Justice O’Bryan noted that the conduct would likely not have been considered misleading if the higher price had been in place for a median period of 12 weeks before the discount was advertised.
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The judgment is seen as a crucial precedent for the entire supermarket industry, clarifying how long a price must remain at a higher level before a subsequent discount can be promoted without contravening consumer protection laws. The consumer watchdog, the ACCC, stated the ruling sends a clear message to all retailers to prioritise shopper understanding over competitive sales tactics.
Coles acknowledged the judgment and is currently reviewing the findings. The ACCC has indicated that any penalty must serve as a significant deterrent, rather than merely being viewed as a cost of doing business.
Shopper Trust Eroded Amidst Ruling
The court's decision has resonated with shoppers, many of whom reported that the ruling validated their existing suspicions about supermarket pricing. Some consumers expressed a diminished trust in major supermarkets, including Coles and its main rival, Woolworths, as a result of these practices.
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Broader Industry Implications and Future Cases
This ruling against Coles comes as the ACCC pursues a similar case against Woolworths, Australia's largest supermarket chain, on comparable grounds. Given that Coles and Woolworths together account for approximately two-thirds of all supermarket sales in Australia, the precedent set by this judgment is expected to have wide-ranging effects across the sector. The judge’s decision in the Woolworths case is anticipated later this year.
Coles had argued that fluctuating prices due to high inflation meant consumers understood price changes, an argument the judge rejected. The supermarket's share price saw a slight dip of around one per cent shortly after the ruling, with Woolworths experiencing a smaller decline of approximately 0.40 per cent.
Background to the "Down, Down" Campaign
The "Down, Down" campaign, a long-standing marketing strategy for Coles, has been central to the legal challenge. The Australian Competition and Consumer Commission (ACCC) initiated the legal action, arguing that the supermarket's promotions created a false impression of genuine savings for consumers. The ACCC chair, Gina Cass-Gottlieb, emphasised the importance of penalties being substantial enough to deter similar conduct in the future.
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