A 1.2kg tin of lamb and vegetable casserole processed into a log of wet dog food sold for $4.50 and spruiked by Coles as being on a “down down” discount, despite being sold for just $4 eight days earlier, was the consumer watchdog’s opening salvo as it began its blockbuster court battle with the supermarket giant.
On Monday, lawyers for the Australian Competition and Consumer Commission (ACCC) and Coles gathered at the Federal Court in Melbourne for the beginning of the case, which alleges “illusory” discounts on a range of household goods.
The ACCC is arguing that Coles artificially spiked prices before lowering them to prices either higher than or equal to what they were previously sold as, but labelled these third prices as “down down,” suggesting a discount.
In preparing its case, which was launched in 2024, the watchdog has filed evidence of 255 products’ prices over 15 months. Of the products in the evidence, their first price was on offer for a median period of a year, before being increased to its second price, a median of 28 days, before being reduced to a third “down down” price which was higher or equal to the first price.
Coles rejects that this constituted misleading conduct, and says the “down down” prices were a genuine discount after suppliers had increased the cost of the products.
The 10-day hearing will focus on just a sample of the 255 products, and on Monday morning, so-called illusory “down down” discounts on Rexona antiperspirant deodorant, 2L bottles of Coca Cola, and Karicare baby formula were also heard.
Barrister Garry Rich SC, leading the ACCC’s case, opened with the example of Nature’s Gift Wet Dog Food, which the watchdog is alleging was priced at $4 between 18 April 2022 and 7 February 2023. It increased to $6 for seven days – its second price – before Coles introduced its third price, $4.50, advertising it as a discount from $6.
“Despite this, Coles proceeded to tell its customers that…the price was down down,” Rich said. “A reasonable consumer who knew the real facts would not think the price of the dog food had gone down.”
“What our friends did was not just increase prices but then proceeded to tell customers that prices were down,” he said.
Justice Michael O’Bryan said that while he understood the ACCC’s claim, he struggled to believe that “consumers aren’t so naive to believe that the price has no relationship with the cost.” He queried why the first price of a product reference in the watchdog’s evidence was a relevant comparison.
“True it is that thousands of products were sold in the market”, he said of the spiked second price. “The ACCC says that’s not long enough,” O’Bryan said.
Rich responded by saying that when viewed over the space of a month, the consumer would have been paying more for the product, not less.
“All the consumer knows (from the label) is that the price is going down…(but) fundamentally the price has gone up,” Rich said. “What’s said on the ticket is a half-truth.”
Rich argued that before Coles introduced its second, higher price, it had a promotional plan ready to discount it days later, and that it wasn’t related to true price signals from the supplier. “We don’t think that’s fair dinkum,” Rich said.
“There is never a scenario in which price two is going to continue.”
The ACCC’s lawyers argued that even if the true supplier costs of products were increasing, Coles risked a fall in sales as a result of those costs due to customers potentially switching products or buying less. Rich claimed to avoid that risk, “Coles disguised those price increases as discounts”.
“(It) begs the question, why on earth are you telling your customers prices are going down? They’re not”.
At one point during Monday’s hearing, Coles’ infamous ear-worm “down down” TV advertisements were played. Rich argued the screenings were relevant because they demonstrated the alleged misleading conduct on ticket prices was just part of the broader messaging context to consumers that discounts were genuine.
Chuckles broke out in the court as the ads were first mentioned. “The jingle that sticks in one’s ears for longer than is healthy,” Rich said. “Your honour will notice the large red hand, and that they’re [prices] are not only down, but staying down.”
Initially, Coles’ “down down” campaign jingle had been performed by rock band Status Quo, reworking their own track of the same name to include the lyrics “down down, prices are down”.
In subsequent years, Coles continued to use the jingle without the band performing it. Justice Michael O’Bryan joked that in the second “down down” ad screened before the court, from 2021, “Status Quo was retired at this stage, it seems”.
Reminding the court of the relevance of the screenings, Rich noted “consumers are not viewing those (“down down” price) tickets on their own in isolation.”
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Elias Visontay is a National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect via email.