Supermarket giant Coles allegedly used its “Down Down” promotion to capitalise on shoppers who have been grappling with soaring grocery bills amid the rising cost of living, the Australian Competition and Consumer Commission (ACCC) told the Federal Court.
To prevent customers from switching to cheaper products or spending less in store, Coles “disguised” its price hikes as discounts on its “Down Down” promotion, ACCC counsel Garry Rich SC told the Federal Court’s Justice Michael O’Bryan on Monday, 16 February.
This then resulted in “substantial and sustained increase in the sales volume”, which leant itself to the “economic incentive for Coles and its suppliers to deploy the Down Down program”, Rich added.
In the watchdog’s case, Coles started with a long-term price of a product (price one), increased it temporarily (price two), and then placed it on a reduced price on the Down Down promotion (price three). Price three was higher than price one, the ACCC alleged.
For example, Rich said a 1.2-kilogram bag of dog food was priced at $4 for one year, was increased to $8 for a brief period, and then promoted with Down Down at a new price of $4.80.
Responding to Justice O’Bryan’s query about whether the price increase was “properly offered”, Rich said it was “not fair dinkum” to tell consumers the prices “have gone down” when the final price was an increase over its original, long-term retail price.
“We would submit there is [a special] potency in telling customers that prices are down in an environment where everywhere around customers prices are going up,” Rich said.
“It’s a very compelling offer: prices are rising everywhere but Coles is telling its customers that, on certain products, prices are down.”
Rich took the court to evidence of Coles receiving increase requests from suppliers in late 2021 and early 2022, and the subsequent internal pressure to amend “guardrails” that governed how and when products could be placed on a Down Down promotion.
The desire to amend the guardrails immediately before the allegedly misleading Down Down promotions led to the alleged contraventions.
Negotiations to increase prices without either the supplier or Coles suffering a loss were “intertwined” with promotion discussions, with Rich alleging both parties agreed to “jack up the price by a lot for a short period, otherwise the Down Down promotion won’t work”.
“What Your Honour sees in the documents is that price two is a step along the way to what was going to be, was planned to be, the regular price of this product, that is the new Down Down price.
“Price two was never going to be the regular price of the product; it was just a step along the way to where they want to get to, which is the supplier and Coles makes more money,” Rich said.
The ACCC also unveiled internal emails suggesting Coles staff were concerned about its competition with Woolworths as the supermarkets rolled out their promotional campaigns, which the regulator has alleged “utterly” misled customers.
Coles managers described Woolworths’ discounting as “shocking” and even suggested potentially approaching the ACCC.
In response, Coles counsel John Sheahan KC said Coles and its suppliers were under pressure following a “quite dramatic increase in inflation” in mid-2021 and into the following few years.
With this in mind, Sheahan said Coles “couldn’t simply refuse” a supplier’s request because its code did not permit it to.
He added there was an “interesting discussion” about what made a previous retail price the “irregular price” and what considerations should be taken into account in deciding that.
The ACCC’s approach is an “entirely truncated process”, he said.
The proceedings will continue on Tuesday.
