Against the spirit of ‘Down Down’: Coles manager’s warning revealed in trial

A top Coles executive warned colleagues that advertising a product’s price as “Down Down” when it was cheaper just four weeks earlier was not in the spirit of the marketing campaign before the supermarket giant went on to do just that.

Lawyers for the Australian Competition and Consumer Commission read out the emails in Federal Court during the first day of a blockbuster hearing on whether Coles had misled millions of customers with “illusory” discounts on everyday items.

Using the emails, the regulator painted a picture of Coles as determined to match Woolworths’ even more aggressive use of short-term price rises, followed by “discounts” that increased sales even though the items became more expensive.

The case centres on a sample of items including dog food, Shapes biscuits and Coca-Cola sold between January 2021 and May 2023, which the ACCC’s lawyers said were sold under a strategy that suggested discounts which were “utterly misleading” or a “half truth”.

Coles previously had sold products at a higher price for at least 12 weeks before discounting them. But in internal Coles emails from the time, staff observed how rival Woolworths raised prices for shorter periods. “They (Woolworths) are really pushing the line here,” one email said.

As Coles’ staff considered whether to follow suit with just four weeks before a price change, then-head of pricing and value Chris Reid sent a cautious internal note. Reid said that while a “Down Down” promotion within four weeks of an established price was permitted, it would not be in the “spirit” of the campaign.

Coles proceeded regardless and change the minimum window to four weeks that established prices need to last before a “Down Down” discount.

At the hearing in Melbourne, the ACCC’s lawyers also referenced sales and revenue figures from Coles they say showed how effective the “Down Down” label was in persuading shoppers.

Barrister Garry Rich, SC, leading the ACCC’s case, noted that Karicare baby formula generated about $67,800 in weekly sales revenue when marketed as a “Down Down” special priced at $21, compared with $49,800 per week when priced regularly at $24. “Substantially more revenue is generated when on promotion than not,” Rich said.

In preparing its case, which was launched in 2024 and will go for 10 days in court, the watchdog has filed evidence of 245 products’ prices over 15 months. Of the products in the evidence, their first price was on offer for a median period of a year before being increased to its second price, a median of 28 days, before being reduced to a third “Down Down” price which was higher or equal to the first price.

Coles rejects that this constituted misleading conduct, and says the “Down Down” prices were a genuine discount after suppliers had increased the cost of the products. Coles’ lead barrister John Sheahan began outlining the supermarkets case late on Monday, making mention of inflation data submitted as evidence.

Woolworths, which is also facing allegations from the ACCC of misleading customers with its discounts, has denied the claims and its case will be heard later this year.

Rich opened with the example of Nature’s Gift Wet Dog Food, which the watchdog alleges was priced at $4 between April 18, 2022, and February 7, 2023. It increased to $6 for seven days – its second price – before Coles introduced its third price, $4.50, advertising it as a discount from $6.

“Despite this, Coles proceeded to tell its customers that … the price was ‘Down Down’,” Rich said. “A reasonable consumer who knew the real facts would not think the price of the dog food had gone down.”

In another example tendered in documents and discussed in court, Shapes biscuits were sold for $5 a packet in 2021, then got as high as $6.50 and went back to $5.50 on a Coles promotion.

Justice Michael O’Bryan said that while he understood the ACCC’s claim, he struggled to believe that “consumers aren’t so naive to believe that the price has no relationship with the cost”. He queried why a product’s initial price was relevant for working out if there was a discount if its cost had fundamentally changed.

Rich, for the ACCC, responded by saying that when viewed over the space of a month, the consumer would have been paying more for the product, not less.

“All the consumer knows [from the label] is that the price is going down … [but] fundamentally the price has gone up,” Rich said. “What’s said on the ticket is a half-truth.”

Rich argued that before Coles introduced its second, higher price, it had a promotional plan ready to discount it days later, and that it wasn’t related to true price signals from the supplier. “We don’t think that’s fair dinkum,” Rich said.

“There is never a scenario in which price two is going to continue.”

The ACCC’s lawyers argued that even if the true supplier costs of products were increasing, Coles risked a fall in sales as a result of those costs due to customers potentially switching products or buying less. Rich claimed to avoid that risk, “Coles disguised those price increases as discounts”.

“[It] begs the question, why on earth are you telling your customers prices are going down? They’re not.”

At one point during Monday’s hearing, Coles’ earworm “Down Down” TV advertisements were played. Rich argued the screenings were relevant because they demonstrated the alleged misleading conduct on ticket prices was just part of broader messaging to consumers that discounts were genuine.

Chuckles broke out in the court as the ads were first mentioned. “The jingle that sticks in one’s ears for longer than is healthy,” Rich said. “Your honour will notice the large red hand, and that they [the prices] are not only down, but staying down.”

The hearing resumes on Tuesday.

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