Justice Michael O’Bryan on Thursday found Coles’ ‘Down Down’ promotions in some cases falsely led customers to believe they were enjoying a true price reduction. The landmark federal court loss could signal the end of “fake discounts” in Australia, according to two former competition watchdog chiefs, with the supermarket giant at risk of record fines exceeding $200m.
Court Ruling on Promotional Pricing
The Australian Competition and Consumer Commission (ACCC) sued Coles and its rival Woolworths, accusing the supermarket giants of duping shoppers between 2021 and 2023 with “was/is” promotional pricing. Justice O’Bryan ruled that Coles’ “Down Down” promotions were misleading in some cases.
Rod Sims, former head of the consumer watchdog, stated: “If you’re suggesting there’s a discount, then it really better be a discount. This is going to have wider implications for all companies … They really need to be sure that what they’re offering consumers is true.”
Broader Implications for Retailers
Jeannie Paterson, professor of law at the University of Melbourne, said the decision would remind businesses that misleading advertising could break the law. She noted that a jewellery store raising prices weeks before Valentine’s Day and then dropping them for the holiday could breach the law if advertised as a “discount.” “People don’t shop for diamonds very often, so a discount off a short-term price rise is likely to be misleading,” Paterson said.
Consumers are entitled to rely on advertising expectations, she added: “This is not about ‘buyer beware’ in Australia any more.” With rising inflation, the decision would make businesses wary of masking price increases with false advertising.
Woolworths Case and Industry Impact
Woolworths is defending a near-identical case, with judgment pending. Prof Allan Fels, another former ACCC chair, said Woolworths would be watching closely. The judge found Coles’ own rules required a product’s former price to be in place for at least 12 weeks before a “Down Down” discount, but in 2022 it was cut to four weeks. Fels predicted other supermarkets would fall in line to avoid court cases.
“They can’t claim it’s a discount if the previous high price didn’t last long enough for it to be a genuine higher price,” Fels said. “It will reduce the amount of fake discounts.”
Financial Consequences for Coles
Coles faces significant fines and lost $630m in market value on Thursday as shares were sold off. Woolworths lost $512m. ACCC chair Gina Cass-Gottlieb said the watchdog would seek a substantial penalty: “It is very important that a penalty is not just able to be dismissed as a cost of doing business, and that it comes at a level that is a significant deterrent.”
Each misleading promotion could attract up to $50m in fines, but the record consumer law penalty is $125m (Volkswagen, 2019). Fels expects Coles to pay hundreds of millions, setting a new record: “Millions of consumers are affected … the behaviour was planned, systematic, and sustained over a long period.”
Class Action and Appeal
Coles could also face additional payments from a class action lawsuit by GMP Law. Special counsel Greg Mackey expects refunds for millions of Australians and noted a 90% chance of appeal. “My guess is there’s 90% chance of an appeal because there’s too much at stake at all levels for Coles,” Mackey said. Coles stated it is reviewing the judgment.
