When ‘Down Down doesn’t add up: How the ACCC caught Coles

One of Australian retail’s most recognisable campaigns buckled under the scrutiny of its own red tickets on Thursday morning, when Coles Supermarkets was found by the Federal Court to have misled shoppers through its long-running “Down Down” pricing promotions. Justice Michael O’Bryan ruled that 13 of the 14 sample promotions examined in court conveyed misleading discounts, with products temporarily raised in price before returning to a level presented as a saving. The proceedings, brought by the Australian Competition and Consumer Commission, centred on whether the supermarket had created the illusion of value at a time when households were already straining under cost-of-living pressures. Consumer group Choice later described the practice as allowing Coles “to have its cake and eat it too”.The ordinary shopperThe ruling did not conclude Coles had fabricated the original inflationary price rises themselves, but found the subsequent presentation of those prices as discounts misled consumers. Justice O’Bryan observed that most shoppers would not have formed any conscious belief about how long the higher price had been in place, beyond “an intuitive sense that the discount being promoted was genuine and not artificial”. That distinction ultimately became fatal for Coles. The Court found consumers interpreted the “Down Down” tickets as signifying a meaningful reduction from a stable earlier price, even if they never consciously calculated the timeline themselves. “They see a big red and white ticket. They read that the price is Down Down. They read that the price was much higher. They think they’re being offered a good deal,” barrister Garry Rich told the court.Dean Salakas, retail analyst at Retail Doctor Group, described the ruling as a common sense judgment. “We need a price to stay higher for at least 12 weeks before we can drop it,” he told Inside Retail. Salakas believes the decision will tauten internal governance around promotions and markdowns. “If you’re a board or an executive and you don’t have a rule in place by the end of today, you’re asleep at the wheel,” he said, adding that retailers now need a policy on how markdowns work. The significance of the case extends beyond the eventual fine. “The fine is not the point,” he said. “You just don’t want to be under scrutiny and you don’t want them to take you to court over potential misleading conduct.”The inflation defenceYet the judgment also carried an important commercial nuance. Coles was entitled to raise prices during the inflationary turbulence of 2022 and 2023 as suppliers pushed through higher costs. In closing submissions earlier this year, Coles argued that “what an ordinary reasonable consumer would relevantly take from the ticket is that the product had last been genuinely offered for sale and sold by Coles at the ‘was’ price at the time indicated”. Professor of consumer behaviour and retail marketing, Gary Mortimer, noted the Court had not found fabricated inflation, but problematic promotional timing. “Those price increases were substantiated through supply requests for price or cost increases, and that then led to higher retail prices,” he told Inside Retail. “The issue of misleading shelf tickets was upheld, and that relates to the period of time that has passed.” Mortimer said Coles previously maintained an internal guideline requiring prices to remain elevated for around 12 weeks before entering a promotion, though those settings were later relaxed amid fierce competitive pressure and attempts to soften post-pandemic price hikes.For Mortimer, the larger implication may be that prices now linger higher for longer. “The ACCC actually doesn’t have clear guidelines in relation to how long prices should remain high, and they use the term ‘a reasonable period of time’,” he said. “The problem with that is such a subjective term.” He believes the ruling effectively establishes a de facto 12-week benchmark that could reduce pricing agility across the sector. “If your favourite chocolate bar goes up, it stays up at that price for at least 12 weeks before it can go into a promotional campaign,” he said. “So Aussie shoppers should expect to pay more.” The implications, he added, stretch far beyond supermarkets and into kitchenware, fashion, pharmacy and department stores where perpetual markdown cycles have historically buttressed merchandising strategy.Since today’s verdict, Reuters reported that Coles shares fell 2.7 per cent after the decision while Woolworths Group, which still awaits judgment in a similar ACCC case over its “Prices Dropped” campaign, dropped 1.9 per cent. The ruling also bolsters a parallel class action brought by GMP Law on behalf of shoppers seeking compensation over affected products. Salakas believes the reputational damage may ultimately eclipse the legal one. “They’ve lost it in the court of public opinion,” he said. “I would tell them to own it and apologise and tell everyone that you’ve put rules in place to make sure this never happens again.” For a retail sector that has spent decades training shoppers to chase the red ticket, Thursday’s ruling may ultimately be remembered as the moment the mechanics of discounting itself came under scrutiny.