Court finds Coles’ Down Down discounts misleading but experts say shoppers will still pay the price

Shoppers can expect higher prices for longer at the supermarket, experts say, after the Federal Court found Coles misled consumers with sham discounts in a landmark win for the consumer watchdog.

Federal Court judge Michael O’Bryan on Thursday ruled 13 of the 14 sample tickets for products listed on Coles’ famed “Down, Down” discounts between February 2022 and May 2023 were misleading.

He said they needed to be sold at a higher price for at least 12 weeks for customers to consider the discounts genuine. Coles held most products at the higher price for just four weeks.

“I have concluded that 13 of the 14 ‘Down Down’ tickets that . . . 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.

“In my view, the ‘Down Down’ tickets for the sample products would not have been misleading if the products had been sold at the ‘Was’ price for a minimum period of twelve weeks immediately preceding the ‘Down Down’ promotion.”

For example, the court heard the example of Nature’s Gift Wet Dog Food, which was priced at $4 between April 18, 2022, and February 7, 2023. It was then increased to $6 for seven days, before dropping to $4.50. Coles advertised it as a discount from $6.

Experts say the ruling could leave consumers worse off.

“What consumers will see is higher prices held higher for longer periods of time,” retail expert Gary Mortimer, from Queensland University of Technology, said.

“Ironically, this case brought by the ACCC, an organisation designed to increase competition and lower prices, will in fact do the opposite.”

The bosses of Coles and Woolworths in recent weeks have indicated food prices would rise over the next six to 12 months as grocery suppliers navigate significant increases in fuel and fertiliser costs caused by the Iran war.

“That means if your favourite block of chocolate goes up in price next week, it will be held at that higher price for at least 12 weeks before it can be discounted,” Professor Mortimer said.

Consumer expert Trent Rigby, director at Retail Customer Advisory agreed and said: “The consumer ends up paying more for longer before the genuine discount arrives.”

“The ruling creates clarity, but clarity isn’t the same as a better outcome for shoppers,” he said.

Mr Rigby said Coles’ “Down, Down” was one of the country’s most recognisable campaigns.

“It worked because consumers trusted what it meant: prices going down and staying down. That trust in Australia’s most recognisable campaign is now gone,” he said.

“I think Woolworths read the room earlier. They quietly killed ‘Prices Dropped’, and launched ‘Lower Shelf Price’, with Amanda Bardwell out talking about long-term price commitments prior to the trial.

“Coles stuck with ‘Down, Down’ throughout their trial and now wears the finding publicly.”

But Mr Rigby doesn’t expect the court’s ruling to have a lasting impact on Coles’ reputation.

“Both Coles and Woolworths hold majority market share and Australian consumers unfortunately don’t have a great deal of options when it comes to where they get their groceries,” he said.

In September 2024, the Australian Competition and Consumer Commission launched separate, but similar, proceedings against Coles and Woolworths, claiming both supermarkets jacked up prices on everyday items before offering discounts at prices higher or equal to the original shelf life.

The court heard Coles’ defence against the allegations in February. Woolworths’ hearing concluded at the end of last month, with the judgement reserved.

Coles’ ruling is a huge victory for the ACCC and boss Gina Cass-Gottlieb, who staked her reputation on the high-profile cases against Coles and Woolworths.

“This is a good example of where competition is at work and that firms still need to very carefully consider what is the understanding of the ordinary consumer,” Ms Cass-Gottlieb said.

“Firms should continue to give discounts and to choose the programs they place the discount promotion in, but it has to be accurate and well understood by consumers.”

In a brief statement to the Australian Securities Exchange following Thursday’s judgement, Coles said the court found all price increases resulted from supplier cost price increased and were, therefore, commercially justifiable.

“However, the court found that, after a cost price increase, a minimum price establishment period of 12 weeks was required before promoting products on its ‘Down Down’ program,” it said.

“As a result, the Court found the Down Down tickets were misleading.”

A Coles spokesman said the supermarket’s priority had always been, and would continue to be, delivering value to its customers.

“This case highlights the importance of clarity for both retailers and customers alike,” he said.

“And the need for clear, practical guidance on minimum price establishment periods to ensure the retail industry can avoid unnecessary litigation in future.”

Coles is reviewing the judgement.