Coles’ discounts misled shoppers, court rules. It could face hundreds of millions in fines

Coles has been found to have misled its supermarket customers over discounts – and could now face hundreds of millions of dollars in penalties.

In a landmark case, Federal Court Justice Michael O'Bryan found 13 out of 14 sample sale tickets examined in the case had not offered genuine discounts, because Coles had not sold the products at a higher price for a reasonable period before promoting them with “Down Down” discounts.

In 2024, consumer watchdog the Australian Competition and Consumer Commission (ACCC) announced it was taking both of Australia’s biggest supermarkets, Coles and Woolworths, to court. It alleged they had each offered hundreds of discounts that an “ordinary customer” might think were genuine, but which were misleading.

Coles and the ACCC have been given until May 29 to agree on penalties and other orders, including a possible donation to Foodbank. A separate class action against Coles by customers will also be dealt with at the same time. If they can’t agree, they will head back to court.

The maximum penalty in this case could be A$50 million per breach of consumer law, or more, which is why the total could stretch into hundreds of millions.

However, an appeal from Coles is still possible. Coles has said it’s “reviewing the judgement”.

Justice O'Bryan is set to rule on the case against Woolworths at a later date. Around two thirds of all Australian supermarket sales are made at Woolworths or Coles. So most Australians are likely to have seen some of the disputed “discounts” being fought over in these two cases.

This was a genuinely difficult decision for the Federal Court. Here’s why it will have huge ripple effects right across Australian retail – and petrol retailers in particular should be paying close attention.

Why it was a lineball decision

As Coles argued in defending itself, its “Down Down” discount tickets were strictly accurate in showing a “before” and “after” price.

However, the decision came down to whether “ordinary customers” might feel aggrieved that the discount did not really deliver the bargain they thought.

The case arose from the ACCC’s allegations that, between February 2022 and May 2023, Coles temporarily increased the price of at least 245 products, from toothpaste to cereal.

It then placed those products on “Down Down” promotions at prices that were the same – or higher – than the price of the products before the temporary price rise.

In his ruling, Justice O'Bryan recognised prices had also risen due to inflation. But he concluded that where the discount “Down Down” ticket referred to a previous price that had only recently been raised, shoppers would be misled about the bargain offered by the discount.

Effectively, this court decision accepts that ordinary customers would expect the “was” price to have been stable for a reasonable period – in this case, at least 12 weeks – for the advertised discount to be genuine and not misleading.

In the judge’s view, 12 weeks was an appropriate period to establish an ordinary price, as it matched Coles’ own internal policies in 2022.

The judge rejected Coles’ argument that inflation meant customers understood prices fluctuate. However, the judge did not find Coles had been shown to have artificially inflated prices. This matters, as it could potentially reduce how much the supermarket faces in future fines.

Read more: Coles accused of ‘utterly misleading’ discounts as major court case kicks off

Huge news for shoppers and retailers

This decision is really significant. It means Australian retailers – not just supermarkets – cannot play games with consumers’ expectations.

If consumers have been led to understand a marketing campaign is directing them to good deals, then that has to be a genuine deal, which takes into account the price customers have been paying over a longer period – not just a temporary discount right beforehand.

For retailers, the decision means they’ll need to take greater care in their marketing. They need to consider whether the overall impression created by a discount campaign matches the reality of what is being offered, and whether it could mislead an ordinary shopper.

Why it matters for Woolworths

The ACCC has also brought a case against Woolworths – Australia’s biggest supermarket – on very similar grounds.

It’s worth noting the Woolworths case in court is slightly different from Coles’ – so we can’t assume the same result.

But Woolworths must at this point be considering its options – including whether settling now, and agreeing on a penalty, may be a smarter choice than waiting for its day in court before the same judge, Justice O'Bryan.

Why it matters for consumer protection

This was a high-stakes case for the ACCC. And it’s a welcome confirmation of the Australian Consumer Law being “fundamental” protective legislation for all Australians.

Just this week, the watchdog was given another $67.7 million over four years in the federal budget to strengthen its competition and consumer law enforcement capabilities.

The ACCC is celebrating its win in court, with its chair Gina Cass-Gottlieb saying “this case has increased transparency and accountability in relation to Coles’ Down Down program”.

The watchdog will now be feeling more confident in its judgement about marketing practices that should not be tolerated.

Much of the new federal funding for the ACCC is to monitor petrol pricing. So petrol retailers in particular should take heed about truth in advertising tied to fuel price fluctuations.

All retailers are now on notice.

Read more: How court cases against Woolworths and Coles could change the future of shopping in Australia