The first day of a landmark federal court case testing whether Coles deceived customers with "illusory" discounts on 245 products has ended, with the consumer watchdog arguing that Coles' previously given justification is irrelevant to its case.
The Australian Competition and Consumer Commission (ACCC) alleges that Coles' Down Down campaign misled customers about the pricing of 245 products between February 2022 and May 2023.
Coles, which faces significant fines if it loses the case, has strongly denied the claims, arguing inflationary pressures drove initial price spikes before products were discounted.
Speaking in court today, ACCC barrister Garry Rich said that argument was irrelevant because the "consumer doesn't know anything about that commercial justification".
"They're just told the price of this product is down. And we say that's not fair dinkum," he said.
'The case of the century'
The ACCC launched the case in September 2024, alongside a separate proceeding against Woolworths, alleging that both had violated consumer law by misleading shoppers on hundreds of popular supermarket items with their Down Down and Prices Dropped campaigns.
The watchdog alleged that both supermarket giants increased the prices of hundreds of products before dropping them to prices that were lower than the inflated prices but still higher than the regular price that applied before the price spike.
When announcing the lawsuit, the ACCC said Woolworths and Coles had sold tens of millions of the allegedly misleadingly discounted goods and derived "significant revenue" from these sales.
Speaking to SBS News on Monday, former ACCC chair Allan Fels said the lawsuit was "the case of the century".
"It affects millions of Australian consumers and households in hundreds of stores around Australia," he said.
Rich said in court on Monday that Coles' Down Down campaign was implemented in 2010 and had since been promoted widely and regularly across various channels, including print catalogues, social media and television and a "jingle that sticks in one's ear longer than is healthy".
Its widespread use was "proof of its commercial effectiveness", he said.
Consumer protection law expert Jeannie Marie Paterson told SBS News that what the ACCC was arguing was essentially: "When we're thinking about what's misleading, we need to take into account the expectation that has been created in consumers by a long, ongoing marketing campaign."
"Coles, on the other hand, will effectively be arguing that, well, it's a supermarket, it's entitled to increase prices," she said.
"In fact, it will say it has held prices on the particular products down for a long period of time to look after consumers, and at some point it had to raise the prices, and it did raise the prices, and subsequently it discounted them."
Among the 245 products related to the ACCC's case against Coles are Arnott's Shapes biscuits, Band-Aids, Cadbury chocolates, Colgate toothpaste, Danone yoghurt, Dettol multi-purpose wipes, Fab laundry liquid, Kellogg's snack bars, Kleenex tissues, Maggi two-minute noodles, Palmolive shampoo, Sakata rice crackers, Sanitarium Weet-Bix cereal, Strepsils lozenges, and Whiskas cat food.
During Monday's hearing, Rich cited the example of Rexona antiperspirant deodorant.
He said it was offered for $5 between March 2021 and April 2022, before increasing to $6.50 for around 30 days. It was then lowered to $6 and promoted under the Down Down promotional campaign for almost a year, with campaign material highlighting a 50-cent discount.
Coles rejects allegations, cites inflationary pressures
ACCC chair Gina Cass-Gottlieb said in September 2024 that the discounts were not only "illusory" but pre-planned.
"We also allege that in many cases both Woolworths and Coles had already planned to later place the products on a Prices Dropped or Down Down promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher 'was' price," Cass-Gottlieb said.
Those claims were echoed by Rich on Monday: "Nobody ever intended to charge full price for these products, beyond the spike ... this is planned, and the only reason the spike happens is because, in the lingo, they need to establish a higher price. It's the only reason."
In a statement released after the ACCC announced its case, Coles said the initial price rises occurred because "Coles was receiving a large number of cost price increases from our suppliers and, in addition, Coles' own costs were rising, which led to an increase in the retail price of many products".
"Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price," Coles company secretary Daniella Pereira said in a statement.
Woolworths also rejected the allegations, with a spokesperson saying at the time that "the suggestion is that Woolworths initiated temporary price spikes and that's not correct factually".
Rich told the court that the ACCC rejected the notion that inflationary pressures justified Coles' promotional strategies.
"It doesn't matter whether there's a proper commercial justification for the price spike that occurred in the middle [of a price increase and subsequent decrease], because the consumer doesn't know anything about that commercial justification.
"They're just told the price of this product is down. And we say that's not fair dinkum. We say that's a half-truth apt to mislead consumers."
Fels told SBS News he shared that sentiment: "Quite possibly the price increases were genuinely needed to cover inflation, but that is not a defence to allegations that consumers were misled and deceived."
Possible penalties and reputational risk
Both Fels and Paterson suggested the outcome of the case — through which the ACCC is seeking a declaration of wrongdoing by Coles and financial penalties — would have wide-ranging consequences.
Fels said: "For Coles it's a huge reputation issue, also potentially fines in the hundreds of millions ... and there is high-level executive involvement, possible board involvement, so nothing could be more important for Coles."
"And for other businesses, it's also important to get an understanding of the difference between a fake discount and real one."
Paterson said that, should the ACCC's case be upheld, it would have economy-wide impacts on fair and transparent pricing practices, which she said was particularly important amid the ongoing cost-of-living crisis.
While the precise amount Coles could be fined remains unclear, fines previously levied on corporations found to have misled customers can be significant.
In September 2025, the Federal Court ordered Optus to pay a $100 million fine after the ACCC launched a case over sales tactics targeting hundreds of vulnerable customers, including First Nations Australians.
A year earlier, Qantas was slapped with a $100 million penalty for selling tickets for flights it had already decided to cancel.
The Coles Group reported a net profit after tax of over $1 billion for the 2024-2025 financial year, meaning that a fine similar to that levied on Qantas or Optus would take a roughly 10 per cent chunk out of the company's annual profits.
Fels said: "I would expect, if the allegations are upheld, a very hefty fine — much more than $150 million."
Paterson said that, if Coles was found to be liable for the alleged wrongdoing, it would face a penalty of at least $50 million. However, she stressed there were too many factors that a judge would have to consider to meaningfully predict the size of such a fine.
"The penalties are in principle extremely large, but my comment would be that the federal court rarely imposes a maximum penalty, but it still can impose quite significant penalties," she added.
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