Coles is currently embroiled in a legal battle with the consumer watchdog over allegations that it misled customers by hiking prices before reducing them and marketing the reductions as discounts.

The grocery giant appeared in Federal Court today as the Australian Competition and Consumer Commission accused Coles of employing “utterly misleading” pricing strategies in its “down down, prices are down” campaign.

The ACCC’s barrister, Garry Rich SC, argued that Coles aimed to prevent customer loss by presenting deceptive discounts after being compelled to raise retail prices due to increased wholesale supplier costs.

“By raising the retail prices of its products, Coles inevitably risked a decline in sales, which could negatively impact its revenues and profits,” Rich explained to the court.

He further claimed that Coles tackled this challenge by promoting the idea that prices were dropping, not rising, through its “down down” campaign.

“Coles camouflaged those price hikes as discounts,” Rich stated.

He said Coles had “spiked the retail price much higher” for a short period of about four weeks and then reduced the price to what became the regular price of the produce.

“Why on earth are you telling your customers that your prices are going down? They’re not,” he told the court.

“The particular promotion they chose was a promotion that hinges on convincing customers that the price of this product has gone down.

“An utterly inappropriate promotional mechanic to use in circumstances where everyone within Coles knows the price is going up.”

He opened the hearing using the example of a 1.2 kilogram can of Nature’s Gift adult wet dog food, which he said was sold for $4 from April 2022 to February 2023.

Rich said Coles had increased the product’s price to $6 for a week, before it was sold as reduced to $4.50.

“Coles’s statement was utterly misleading,” he said.

“Coles had increased its price to $6 just seven days before the promotion and for 296 days before that, the price was $4.”

Using a giant red hand, the “down down” campaign began in 2010 and claimed prices on everyday household products had been reduced and were staying low.

Coles said it was helping Australians keep their grocery costs down as part of its commitment to lower the cost of living, Rich said.

However, he alleged that in reality Coles had misled customers on prices for 245 similar products, including toothpaste, soft drink, shampoo, band-aids and laundry powder.

“You’re not lowering the cost of living, you’re not driving prices down, in circumstances of the kind we have here,” he said.

Representing the supermarket chain, barrister John Sheahan KC said in mid-2021 there was a “sudden, unanticipated and quite dramatic” rise in inflation.

He said this led to an “unprecedented” number of requests from suppliers to increase their wholesale costs, including from major brands like Coca-Cola and Colgate.

This increase was passed onto the customer via an increase in the retail price.

“Ordinary, reasonable consumers know they’re in an inflationary environment and they know that means the price of things is changing in an upward direction,” Sheahan said.

The ACCC’s claim Coles said prices were going down when they were going up had distorted the perspective of the ordinary consumer, he added.

The 10-day trial before Justice Michael O’Bryan continues tomorrow.

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