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Coles is under scrutiny as the consumer watchdog accuses the supermarket giant of misleading customers through deceptive pricing tactics. At the heart of the issue is the allegation that Coles artificially inflated prices before cutting them, thus misleadingly promoting these cuts as genuine discounts.
Today marked the beginning of the trial in the Federal Court, where the Australian Competition and Consumer Commission (ACCC) presented its case. The ACCC charged Coles with employing “utterly misleading” pricing strategies in its well-known “down down, prices are down” advertising campaign.
Garry Rich SC, representing the ACCC, argued that Coles resorted to these tactics to prevent losing customers. The retailer had previously raised prices on certain items due to increased wholesale costs, and the barrister claimed Coles attempted to mitigate potential customer loss by falsely advertising discounts.
“By increasing the retail price of its products, Coles inevitably risked a decline in sales, which would affect both its revenue and profits,” Rich explained to the court.
To manage this risk, Coles allegedly informed its customers that prices were decreasing rather than increasing, utilizing the “down down” promotion as a strategy to maintain customer interest and sales.
“Coles disguised those price increases as discounts,” Rich said.
He said Coles had “spiked the retail price much higher” for a short period of about four weeks and then reduced the price to what became the regular price of the produce.
“Why on earth are you telling your customers that your prices are going down? They’re not,” he told the court.
“The particular promotion they chose was a promotion that hinges on convincing customers that the price of this product has gone down.
“An utterly inappropriate promotional mechanic to use in circumstances where everyone within Coles knows the price is going up.”
He opened the hearing using the example of a 1.2 kilogram can of Nature’s Gift adult wet dog food, which he said was sold for $4 from April 2022 to February 2023.
Rich said Coles had increased the product’s price to $6 for a week, before it was sold as reduced to $4.50.
“Coles’s statement was utterly misleading,” he said.
“Coles had increased its price to $6 just seven days before the promotion and for 296 days before that, the price was $4.”
Using a giant red hand, the “down down” campaign began in 2010 and claimed prices on everyday household products had been reduced and were staying low.
Coles said it was helping Australians keep their grocery costs down as part of its commitment to lower the cost of living, Rich said.
However, he alleged that in reality Coles had misled customers on prices for 245 similar products, including toothpaste, soft drink, shampoo, band-aids and laundry powder.
“You’re not lowering the cost of living, you’re not driving prices down, in circumstances of the kind we have here,” he said.
Representing the supermarket chain, barrister John Sheahan KC said in mid-2021 there was a “sudden, unanticipated and quite dramatic” rise in inflation.
He said this led to an “unprecedented” number of requests from suppliers to increase their wholesale costs, including from major brands like Coca-Cola and Colgate.
This increase was passed onto the customer via an increase in the retail price.
“Ordinary, reasonable consumers know they’re in an inflationary environment and they know that means the price of things is changing in an upward direction,” Sheahan said.
The ACCC’s claim Coles said prices were going down when they were going up had distorted the perspective of the ordinary consumer, he added.
The 10-day trial before Justice Michael O’Bryan continues tomorrow.
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