Coles faces ‘colossal’ fines for misleading shoppers
A court has ruled Coles misled shoppers with illusory discounts under its “Down Down” campaign in a decision which could mean hefty fines for the retailer.
Coles faces penalties in the hundreds of millions of dollars after a court ruled it misled shoppers with illusory discounts.
Federal Court judge Michael O’Bryan delivered his ruling in the landmark case on Thursday morning, brought by the consumer watchdog, finding Coles deliberately disguised price hikes as discounts under its “Down Down” price campaign.
“Thirteen of 14 ‘Down Down’ tickets that were the subject of consideration in the joint liability trial 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.
“As a consequence, the discount represented on the tickets was not genuine.”
The decision could mean the $28 billion company is hit with significant penalties, which will be the subject of argument by the parties.
The penalties could technically attach to every time a contravening product was advertised, Melbourne University consumer law expert Jeannie Paterson said.
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“The penalties could be colossal, absolutely colossal, because it’s per contravention,” she said.
Professor Paterson said rather than impose a meaninglessly large penalty, the court will look at Coles’ culpability, the steps it took to mitigate harm and the period of time over which the breaches occurred.
The Australian Competition and Consumer Commission brought separate but similar cases against the country’s two dominant supermarket chains with a Woolworths suit awaiting judgment at a later date.
Both cases alleged the supermarkets misled consumers by increasing prices for a short time before lowering them to above the original price and marketing it as a discount.
Justice O’Bryan noted that until March 2022, Coles’ own internal policies stipulated a product could not be sold under the “Down Down” promotion unless it had been sold at the previous price for a minimum period of 12 weeks.
He said Coles relaxed its policy under perceived pressure from its closest competitor Woolworths.
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In Thursday’s ruling, Justice O’Bryan found if the products were sold at the higher price for 12 weeks before being marketed as a discount, it would not have been misleading.
“The vast majority of ordinary consumers, when shopping would not have formed any conscious belief about the period for which the product had been offered for sale by Coles … beyond an intuitive sense the discount being promoted was genuine and not artificial,” he said.
Justice O’Bryan also ruled one of the products sold under the ‘Down Down’ campaign, a can of Nature’s Gift dog food, was not misleading because it did not include a “was” price on the ticket.
One of the examples of a product offer found to be misleading was a jar of Coles-brand quince paste that was raised to $4.50 from $3 for four weeks, before being reduced to $3.15.
The watchdog identified hundreds of products on the Coles campaign and a similar “Prices Dropped” push from Woolworths that followed a similar formula.
During separate hearings, lawyers for the supermarkets argued prices increased due to inflationary pressures and the discounts were genuine.
Coles’ barrister John Sheahan argued “ordinary, reasonable consumers” knew that prices generally trended upward due to inflation.
Prof Paterson said Woolworths would be watching the judgment closely as it awaits its own fate, adding that the cases played out slightly differently but she would expect the same result for both.
As markets opened shortly after the ruling Coles’ share price was down around one per cent, while Woolworths had a smaller dip of around 0.40 per cent.
–with AAP
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