The Australian Competition and Consumer Commission (ACCC) has initiated federal court proceedings against supermarket chain Coles, alleging that its "Down Down" marketing campaign and other promotional pricing practices misled millions of customers. The ACCC contends that Coles temporarily increased prices on numerous household items before applying discounts, creating an "illusory" impression of genuine savings. Coles denies the allegations, arguing that its pricing strategies reflected genuine discounts driven by supplier cost increases and a period of significant inflation. The case, which involves detailed examination of pricing data and internal communications, has broader implications for retail pricing practices across the Australian supermarket sector.
ACCC Allegations of Misleading Practices
The ACCC alleges that Coles engaged in a "planned" campaign between January 2021 and May 2023, specifically from February 2022 to May 2023, to mislead customers. The core accusation is that Coles increased prices on hundreds of products, in some instances temporarily, before reducing them and applying a "Down Down" or "Everyday Value" label. The consumer watchdog claims that these "discounted" prices were sometimes equal to or higher than the regular prices before the temporary increase.
The ACCC has identified 255 alleged breaches, focusing on 12 specific items for the court hearing to enhance efficiency. These products include Karicare baby formula, Arnott's Shapes, Nature's Gift wet dog food, Danone yoghurt, 2-litre Coca-Cola bottles, Rexona deodorant, Strepsils, Lurpak butter, and toothpaste. The ACCC also cited instances from the "Coles Locked" campaign as part of its case.
Examples of Alleged Misleading Discounts
Several specific product examples were presented in court by the ACCC:
- Nature's Gift Wet Dog Food: Allegedly priced at $4 for approximately 300 days (from April 2022 to February 2023), increased to $6 for seven days, and then reduced to $4.50, advertised as a discount from $6. The ACCC argued this was misleading given the product's prior $4 price. Coles acknowledged this specific instance as an error and a violation of its internal pricing guidelines.
- Karicare Baby Formula: Reportedly sold for $18 for 794 days under a "Down Down" promotion. In March 2023, the price increased to $24 with a standard white ticket. After 23 days, it dropped to $21, again marketed with a "Down Down" ticket and a "Was $24" comparison price. The ACCC highlighted that customers had paid $18 for over two years prior. Sales revenue for the formula was reportedly higher when advertised as a "Down Down" special.
- Yoghurt: Priced at $6 for 461 days, then increased, and 28 days later returned to a "Down Down" price that was $0.70 higher than the original $6.
- Strepsils: Allegedly increased from a regular price of $5.50 to $7 for 28 days, then discounted to $6 under a "Down Down" promotion, which was still 9% higher than the original regular price.
- Coca-Cola (2-litre): A bottle reportedly cost $2.75 at the start of 2021 with a "Down Down" advertisement. After a price increase and a white ticket, it was quickly put back on "Special" at $3.50, which then became the new "Down Down" price, $0.75 (27%) higher than the initial $2.75.
The ACCC argued that while the price label might be "literally true" regarding the immediate previous higher price, it was "utterly misleading" or a "half truth" given the product's long-term pricing history.
ACCC legal counsel Garry Rich stated that shoppers, often in a hurry, perceived the red "Down Down" tickets as indicating a genuine price reduction without necessarily knowing the product's price history.
Coles' Defense and Arguments
Coles denies the allegations of misleading conduct. Its legal team, led by John Sheahan KC, asserted that the promotions represented genuine discounts that followed increases in product costs from suppliers.
Supplier Cost Increases and Inflation
Coles argued that the period in question (January 2021 to April 2023) was "a time of significant inflation in Australia and globally," with Australia experiencing a 30-year high in inflation. Coles stated it faced an unprecedented volume of price increases from suppliers, citing rising global commodity prices, packaging, freight, utilities, and international shipping. Coles claimed that in 243 out of 255 instances, suppliers requested higher shelf prices or changes to promotional funding.
Genuine Discounts
Coles maintained that the "Down Down" prices represented genuine discounts from newly established shelf prices, which were themselves necessitated by increased costs. The company argued that the original price was no longer relevant due to increased costs and that prompt re-offering of lower prices after an increase was standard business practice.
Consumer Understanding
Coles contended that the ACCC's case was overly complicated, assuming shoppers understand detailed planning and forecasting involved in pricing. Coles suggested that consumers are primarily concerned with whether a claimed discount is "fair dinkum" and that adding extensive background information about price history to tickets would make them too difficult to understand.
"Literally Correct" Tickets
Coles asserted that the pricing tickets shown to customers in stores were "literally correct" and reflected a genuine discount from the immediate prior price.
Duration of Higher Prices
Coles stated that for most of the 245 items examined in the case, prices were increased for four to six weeks, not just short periods, and significant volumes were sold at these higher prices.
ACCC's Definition
Coles argued that the ACCC had not adequately defined what constitutes a "regular" price or its required duration before a discount can be applied.
Coles CEO Leah Weckert stated that the company takes the matter seriously, aiming to provide genuine savings and uphold customer trust with all specials and programs like "Down Down."
Court Proceedings and Key Testimonies
The Federal Court hearing involved testimony from current and former Coles managers and ACCC legal counsel.
Internal Communications
Evidence included internal Coles emails, with one reportedly showing a senior executive cautioning colleagues that promoting a product as "Down Down" just four weeks after it had been sold at a lower price was not aligned with the campaign's intended spirit.
Internal Guardrails and Breaches
Coles had internal guidelines, or "guardrails," for its "Down Down" program, which required a product's "was" price to be established for a minimum period (reportedly four weeks) before a "Down Down" promotion could be applied. Rebecca Thompson, a former Coles biscuits and cookies category manager, admitted to a breach of these guardrails for Arnott's Shapes multipack, attributing it to "human error." Coles acknowledged breaching these policies for at least two products (Arnott's Shapes and Nature's Gift dog food). The ACCC presented evidence that 62 of 245 products were sold at a higher price for less than 28 days before being discounted.
Supplier Negotiations
The court heard details of negotiations between Coles and suppliers, such as Real Pet Food, where price increase requests were countered by Coles. Paul Carroll, a former head of Coles' pet food category, testified that he prioritized customer interests and pricing, a claim challenged by ACCC barrister Garry Rich, who suggested the primary goal was to increase sales and revenue.
Judicial Intervention
Justice Michael O'Bryan, presiding over the case, questioned the ACCC on whether it had adequately pleaded that shoppers believed they were receiving a "genuine discount" or "a good deal," suggesting the case might fail on these points. He also indicated that the case might be decided on the "genuineness" of the discounts, independent of previous regular prices, and suggested that Coles' discount pricing "may well be a good deal" when considering factors like supplier cost increases.
Competitive Pressure
The ACCC suggested that Coles' strategy aimed to mirror Woolworths' approach of short-term price increases followed by "discounts," leading to a "race to the bottom" to establish a higher price for the shortest possible period before applying a discount.
Much information, including specific documents and figures presented in affidavits, remained suppressed due to commercial-in-confidence concerns raised by Coles.
Broader Industry and Financial Context
The ACCC's action against Coles occurs amidst increased scrutiny of major supermarkets in Australia, fueled by consumer concerns about rising grocery costs and parliamentary inquiries into supermarket practices.
Coles Financial Results
Coles reported its half-year financial results for the first half of the 2026 financial year. Supermarket sales (excluding tobacco) increased by 3.6%, attributed to consumers seeking promotions and specials. Overall group sales rose 2.5% to $23.6 billion. Net profits declined by 11.3% to $511 million, including a $165 million provision for penalties related to an underpayment scandal. Excluding this penalty, net profits increased by 12.5% to $676 million. Coles announced an interim dividend of 41 cents per share. Coles' share price decreased by 7.4% to $20.56, falling below market expectations. Coles' supermarket business margins increased from 5.2% to 5.8%.
Woolworths Financial Results
Woolworths Group experienced its best single-day share market performance on record following strong earnings for the first half of the financial year. Shares rose 13 percent. Net profit decreased 49 percent to $354 million due to a $485 million charge for staff remediation. Excluding this charge, net profit increased 16 percent to $859 million, exceeding analyst expectations. Sales in the Australian Food division increased 3.6 percent. Woolworths reported an interim dividend of 45 cents per share. Woolworths claimed "eight consecutive quarters of year-on-year price declines" in average grocery prices, using a methodology that tracks the average price of items actually sold, which can reflect consumer shifts to cheaper alternatives. This claim contrasts with general consumer observations of rising costs and Australian Bureau of Statistics (ABS) data indicating a 3.4% rise in the food and non-alcoholic drink category for 2025.
Inflation and Consumer Behavior
Headline inflation was 3.8% in January, consistent with December, with food and non-alcoholic beverages being a significant contributor to annual inflation. Customer surveys indicated that 77% of shoppers prioritize price for their main grocery shop. Consumer sentiment showed improvement leading up to Christmas, though expectations for further interest rate hikes suggest continued tight household budgets.
Market Concentration
Coles and Woolworths collectively control approximately two-thirds of the Australian supermarket market, which the ACCC has characterized as "oligopolistic."
Similar Woolworths Case
Woolworths is also facing similar allegations from the ACCC regarding its "prices dropped" promotions, with its case scheduled for later in the year.
Potential Outcomes and Penalties
The ACCC is seeking significant penalties, potentially including fines up to $50 million per breach, product donations to charities, and injunctions. If Coles loses the case, potential penalties could reach "hundreds of millions of dollars," according to former ACCC chair Allan Fels.
The outcome is expected to influence "Was, Now" retail pricing practices across the industry, potentially leading to greater transparency for consumers and sharper competition.
Conversely, a loss for the ACCC could raise questions about its decision to pursue the case amid political pressure. Beyond this lawsuit, the federal government has banned "excessive pricing of groceries" from July 1, prohibiting large retailers from charging prices that exceed the cost of supply plus a reasonable margin, which the ACCC indicated may lead to further legal action.
The federal court judge is currently reviewing the evidence to determine the verdict of the lawsuit.