Federal Court Finds Coles Misled Shoppers with 'Down Down' Pricing
Australia's Federal Court has ruled that supermarket giant Coles misled consumers through its prominent 'Down Down' promotional campaign, in a landmark decision that scrutinizes the retailer's pricing practices. Justice Michael O'Bryan found that Coles broke consumer law by advertising discounts that were not genuinely concessional, in a case brought by the Australian Competition and Consumer Commission (ACCC).
The case centered on 'was/is' comparative pricing, a common retail tactic that the court found was misused in this instance.
The Ruling: A Case of Misleading Marketing Tactics
The ACCC initiated legal action against Coles, alleging the company misled shoppers with fake discounts on hundreds of common household items, including paper towels, dog food, and baby formula. The allegations were not about whether Coles could raise prices, but how it marketed price reductions.
Justice O'Bryan's judgment, delivered in Melbourne, found that in 13 of 14 pricing tickets submitted as evidence, the discounts represented were not genuine. He concluded that these tickets misled consumers because the products had not been sold at the 'was' price for a reasonable period, making the claimed discounts illusory.
Coles had defended the case, asserting that the discounts represented genuine price reductions. However, the court determined that the company had not adhered to its own internal policies, which required a product to remain at a non-promotional 'was' price for an extended period before being placed on a promotional ticket.
The ACCC had used 12 sample products to argue its case, and data from one such product, a baby formula, illustrated the pattern. The formula remained at $18 for 794 days as part of a Down Down promotion, then rose to $24 for just 23 days before being discounted to $21, with a Down Down ticket showing a 'was' price of $24. The court found that such tactics would likely mislead an ordinary customer.
Coles' Internal 'Guardrails' and Competitive Pressures
A key aspect of the case involved Coles' internal business rules, which the company called 'guardrails.' These rules were designed to ensure compliance with consumer law by dictating how long a product should remain at a higher price before a discount could be advertised. For a period, Coles tampered with these guardrails, a change that the court heard was partly a response to inflationary pressure and competition from rival supermarket Woolworths.
Reports indicate that Coles was receiving price increase requests from suppliers and was hesitant to pass these on directly, while also monitoring Woolworths' pricing strategies. This led to a situation where Coles shortened the timeframes for its 'was' prices, undermining the genuineness of its 'Down Down' promotions.
Perspectives and Reactions
The ACCC's Stance
The consumer watchdog has consistently argued that such marketing tactics are 'literally true' but 'utterly misleading.' The ACCC's legal team contended that Coles had artificially inflated prices to create an illusion of a discount, a practice that undermines consumer trust and exploits market power.
Coles' Defense
Coles has defended its pricing practices, arguing that the discounts were genuine and that it had acted in good faith to provide value to customers. The company had rejected the ACCC's claims, but the court's judgment has now cast a spotlight on the fine line between competitive pricing and deceptive marketing.
Legal and Retail Commentary
Legal experts suggest this ruling sends a strong signal to the retail sector about the importance of transparent pricing. While the case focuses on Coles, it raises questions about industry-wide practices regarding 'was/is' pricing and the need for compliance with consumer protection laws. The retail sector will be watching closely for any appeal and the potential for further regulatory scrutiny.