Coles put commercial interests above its customers – and was caught red-handed | Supermarkets

Coles’ “Down Down” promotion is one of Australia’s best-known campaigns. But the supermarket was caught red-handed after a federal court judge found Coles had misled shoppers by promoting fake discounts.

Australia’s competition regulator has given consumers an intriguing behind-the-scenes moment through its operations, revealing how a major supermarket manipulated customers into buying its products.

The case developed as follows.

Defective ‘guardrails’

In a judgment handed down on Thursday morning, accompanied by a 523-paragraph judgment, judge Michael O’Bryan explained how Coles had fallen into a trap when he tried to ramp up his well-known campaign.

Known for its catchy tune and big red needle, the Down Down promotion is based on the “was/was” comparative pricing practice of claiming that a product is cheaper than it used to be.

This promotional tactic was investigated by the Australian Competition and Consumer Commission at Coles and other retailers.

The concern here is that it is open to abuse by creating misleading discounts; These discounts are often achieved by temporarily increasing a price and then immediately lowering it again, tricking customers into thinking they are getting a good deal.

The court heard that Coles had internal business rules called “guardrails” which meant that products had to remain at their “previous” price without promotion for an extended period of time before prices were reduced and the “Down Down” label was slapped on the product.

Guardrails are more than just guides, given that they were developed to take into account consumer law and avoid the accusation that the “previous” price was not genuine.

According to the decision, Coles began tampering with the guardrails in late 2021 and early 2022 due to two main factors.

First, during an inflationary period, it was receiving price increase requests from suppliers and therefore no longer wanted to sell the products at a discounted price.

But it also had its sights set on rival Woolworths, which used a shortened time frame to determine the “was” price before placing items in its “Prices Down” promotion.

As of January 2022, Coles was using the ‘previous’ price length of 12 weeks. In March, it reduced the guardrail requirement to just four weeks.

Consumers noticed examples of products being advertised as discounts despite being more expensive than they were a few weeks ago and began sending them to regulators.

The ACCC’s interest grew and it found hundreds of products affected, including everything from deodorant to butter.

O’Bryan said on Thursday Coles had changed its practices “in response to perceived competitive pressure from its closest rival”.

“I conclude that ‘Down Down’ tickets for sample products would not be misleading if the products had been sold at the ‘before’ price for a minimum of 12 weeks immediately preceding the ‘Down Down’ promotion,” O’Bryan said.

Fat supermarket wife

There’s still a lot to work out, including legal wrangling over penalties that could result in tens of millions of dollars in fines for Coles.

Given Coles’ current fencing isn’t available to the public, it’s unclear whether the supermarket will need to overhaul its promotional practices.

The supermarket said it was reviewing the decision.

There is also a question about whether 12 weeks should be read as a standard timeframe for setting a price in the industry more broadly, or whether the decision will be specific to Coles.

Woolworths faces very similar accusations from the ACCC in federal court and is awaiting its decision.

But it’s clear that the reputation of Australia’s major supermarkets has been rightfully tarnished in recent years.

From being the first pandemic heroes feeding Australia, they have evolved into a duo that has increased profit margins at the expense of shoppers and farmers in times of high living costs.

The court has now found that Coles had engaged in conduct that misled its customers in breach of consumer law.

Commenting candidly on his decision, O’Bryan said Coles was experiencing a “race to the bottom” in complying with consumer laws due to competitive pressure from Woolworths.

In other words, Coles put his business interests above his customers and was caught red-handed.